There’s no denying the tight supply of homes, including rental spaces, in Luxembourg. This limited supply helps maintain relatively high prices, which has contributed to over the past decade. While high mortgage rates, driven by inflation, home-buying activity for past two years, the rental market remained resilient. Rental prices , largely unaffected by the broader market trends.

However, in January and February 2025, asking prices per square metre for rentals began to decline, latest data from the property listings site Immotop.lu shows. This was the first drop in two years. While this could be a small correction or a temporary pause, it may also signal that rental price increases are no longer aligned with the financial capacity of new renters.

It is possible that limited supply and high rents in city centres have driven many renters to settle in more distant areas where rents are lower, including cross-border residences, which in turn results in longer commute times. Additionally, without indexation, wages have remained stagnant since , while overall household expenses have risen, including a 30% increase in in 2025. This has likely placed more strain on lower-income households, making it increasingly difficult to keep up with rising rental costs. The combination of these factors is bound to create significant financial pressure on rental families. But while rents still remain high, a pause in the 8.4% annual rise in rental prices in 2024 alone is a welcome change.

Sale prices

Asking prices for residential properties continue to follow a downward trajectory, suggesting that the Luxembourg housing market has not yet reached its bottom. In February 2025, the average asking price for residential properties fell to €8,179 per square metre, down from €8,629 per square metre a year earlier. This marks the lowest level since January 2021.

Two key factors may explain this development: Firstly, sellers may be more willing to negotiate on prices, as there are not enough potential buyers who are ready to finalise offers at the asking prices, thus pushing the overall market down. Secondly, despite the and aimed at stimulating demand, current mortgage rates and other financing conditions may still prove restrictive for many buyers. It is possible that these high rates continue to deter potential buyers, especially first-time buyers who struggle to meet affordability criteria. If this restrictive lending environment persists, it could further contract the number of properties changing hands.

While it remains to be seen how the market reacts after the temporary tax subsidies , the government could potentially expand existing incentives to include first-time buyers, particularly those still undecided on their primary residence, but might instead opt to purchase smaller units to rent out.