The Luxembourg residential real estate market experienced a marked downturn in housing sales and prices during the third quarter of 2023, according to a report released by the ministry of housing on Thursday 21 December. This period saw a notable drop in these metrics, in stark contrast to a moderate uptick in advertised rental and sale properties. The report--compiled by the national statistics bureau Statec, the Housing Observatory of the ministry of housing, and the Registration Duties, Estates and VAT Authority (AED)--revealed that this downturn was particularly pronounced in the segment of apartments under construction or in planning stages.
Sales and volume
The residential property and land markets, in comparison to previous years, have been characterised by a significant slowdown. This trend is pervasive across all segments, with newly constructed apartments for sale experiencing the most dramatic decline--at only 119 units sold in Q3 2023--a 60% reduction compared to the same period in 2022, and a 77% drop against the average sale prices commanded in 2021 and 2022. These figures underscore the acute challenges facing the housing market, especially for newly built apartments.
The volume of apartment sales, encompassing both existing and those under construction, fell by 38% from the third quarter of 2022, reaching the lowest level of transactions recorded since the land registry file was established in 2007, data from the ministry showed.
Moreover, the average transaction value for apartments, which stood at €614,115, declined by 12% from the €694,052 average in Q3 2022. This suggests the markets are undergoing a corrective phase in apartment pricing, although prices are still more than double the 2010 average, as reported by Statec.
The house sales segment also witnessed a significant downturn, with a 47% decline in the number of sales compared to the same quarter in the previous year. The total number of transactions, at a mere 404, marked an all-time low.
Similarly, the average transaction value for houses, at €906,422, saw an 18% reduction from the average sale price of €1.1m in Q3 2022. This decrease is attributed to the diminished purchasing power resulting from rising interest rates, particularly impacting the existing houses market, stated the report.
Land sales
The third quarter also witnessed a drastic reduction in the sale of plots for housing and residential purposes, with only 185 transactions recorded--the lowest ever. This represented a 56% decrease from Q3 2022, and the average transaction prices for these plots fell by 10%.
Market trends
While advertised rental prices for houses and apartments have largely stabilised since Q2 2023, the asking price for house rentals increased by an average of 3% over the past twelve months, and apartment rentals saw a 2.2% rise in the same period. Conversely, the asking prices for houses and apartments for sale continued to rise, indicating a likelihood of sellers negotiating lower final prices, as reflected in the average transaction prices.
In summary, the third quarter of 2023 was characterised by a significant drop in both activity and prices within the grand duchy’s residential real estate market. This contrasts with a relative stabilisation and modest increase in advertised prices for rentals and sale, respectively.
