Following the sharp correction of 2022–2024, residential property prices in Luxembourg have been stabilising since early 2024, caught between demand weakened by rising interest rates and a structurally constrained supply. According to Julien Licheron, Research Associate at LISER, a further widespread fall in prices appears unlikely in the short term. Provided that the deterioration in the international environment does not trigger a new economic shock, the central scenario remains one of stability, with marked disparities across different segments and locations. In the medium term, a gradual rise in house prices seems plausible, though without a return to the sharp increases seen prior to 2022.
To wait or not to wait?
In this context, is now the right time to buy? Compared to the period 2017–2022, the market environment is more favourable to buyers in certain respects: prices have stabilised, there is a reduced risk of buying at the peak of the cycle, and buyers have regained real bargaining power. Admittedly, rising interest rates raise questions, but this should not obscure the bigger picture. As Cédric Weisse, Head of Retail Banking at BIL, points out, the wisdom of buying a property depends essentially on the objective being pursued. For a main residence, the purchase is first and foremost part of a life plan, based on criteria such as professional and family stability, repayment capacity and the intended holding period for the property. When these factors are in place, there is no reason to delay bringing your plans to fruition. Market conditions and interest rates become secondary considerations.
Property investment
The approach is different for rental investment or short-term purchases. Combined with rent controls, high construction costs and substantial capital requirements (in practice, banks require a minimum of 20% equity), rising interest rates are weighing on profitability. So much so that it raises questions about the merits of other investments offering attractive, liquid returns without management constraints. Rather than viewing rental investment as a means of generating immediate returns, it should be approached from a long-term wealth-building perspective, based on the accumulation of real assets, diversification and potential for future appreciation, whilst immediate returns are driven more by rental income.
Funding
The choice of financing remains a key consideration. According to Lionel De Broux, Chief Investment Officer at BIL, there is a significant risk that interest rates could start to rise again in the current geopolitical climate. In this context, a fixed-rate loan offers valuable budgetary certainty, whilst a variable-rate loan provides greater flexibility at the cost of increased risk. For many borrowers, combining the two allows them to strike a balance between security and flexibility.
What’s the takeaway? Whether it’s a main residence or a rental investment, any property project should be assessed on the basis of its soundness, its consistency with your goals, and its overall alignment with your life or financial objectives. If these conditions are met, it’s always the right time to go ahead with it.