It’s no secret that the price of land in Luxembourg plays a key role in the high level of housing prices. As a small country, land is scarce, and anything scarce is expensive. But the Housing Observatory has just demonstrated this--with figures to back it up--in its on land prices.
To arrive at this observation, the Housing Observatory has set up a hedonic model that makes it possible to establish an index of building land prices tracking changes in the value of these plots while neutralising changes in the composition of transactions from one year to the next.
The model shows that the price per acre of a plot of land is influenced by three main variables:
- the intrinsic qualities of the plot. For example, a plot shaped like a square or circle will be worth more than a long rectangle; the larger the surface area, the cheaper the are; and if the plot is a Baulücke (in-fill), it will be worth more;
- information from the general development plan (plan d’aménagement général, PAG). A plot in HAB II (collective housing) is worth more than in HAB I (single-family home), for example;
- the date of the transaction, as the price per are has risen sharply over time.
To this must be added the location of the plot and its distance from Luxembourg City, with the journey time to the capital being an important factor.
Once these sale prices have been modelled, it is possible to quantify the differences between communes if the same plot were sold, leading to the development of groups of communes with similar prices. This shows that the median price of a plot of land in Luxembourg over the period 2020-2022 is €304,279. In the north, it is €49,743, six times less expensive.
If we compare these results with , we can see that the spatial structure of building land prices and that of housing prices and advertised rents are very similar. However, the price ratio is not of the same magnitude, since the swing is “only” 1 to 2 for house prices. Nevertheless, the figures in this study confirm that land is the main driver of price differences between municipalities on the residential property market.
This article was originally published in .