Housing Prices Up 16.7% over 1 Year

STATEC has published a report on housing prices in Luxembourg for the fourth quarter of 2020.

In the fourth quarter of 2020, house prices (apartments and houses combined) increased by 16.7% compared to the fourth quarter of 2019, which constitutes a marked acceleration in the rates observed in previous quarters. In 2019, the average annual increase was 10.1%, whilst  in 2018, prices had increased by 7.1%, compared to 5.6% in 2017 and 6.0% in 2016.

According to STATEC, the price of old apartments was 15.8% higher and that of new apartments 14.4% higher in the fourth quarter of 2020 than the same period in 2019. The price of old houses were up 19.7% over one year. 

In addition, the price of apartments under construction (corresponding to sales in future state of completion) rose sharply in the fourth quarter of 2020: an increase of 8.1% was observed compared to the previous quarter. The indices for existing apartments and old houses increased less rapidly than in the previous quarters: 2.6%, respectively 3.3% in quarterly variation.

The number of transactions was only slightly impacted by the COVID-19 health crisis: the number of sales registered with the Luxembourg Registration Duties, Estates and VAT Authority (Administration de l'enregistrement, des domaines et de la TVA - AED) decreased by 22% in the second quarter of 2020 (compared to the same period of 2019), but returned to a pre-crisis level during the last two quarters of 2020. The number of acts for the whole of 2020 was 6.3% below the level of 2019.

STATEC attributed the recent sharp increase in the price of apartments under construction partially to a particular phenomenon in the eastern region of the country, which corresponds to the cantons of Echternach, Grevenmacher and Remich. In the first and second quarter of 2020, the number of apartment sales was close to 100 units before increasing to 140 in the third quarter and 201 units in the last quarter of 2020. In particular, the construction of a new housing estate in Mondorf- les-Bains (with 46 apartments sold in the future state of completion in the last quarter of 2020) had an upward impact on the price index.

The selling price per m² depended mainly on the type of apartment, its surface area and its location. On average, an apartment under construction was between 15% and 20% more expensive than an existing property of a comparable size. The price per m² then decreased with the surface of the accommodation.

Location is also an explanatory factor determining the prices of existing houses. In the canton of Luxembourg, the average price of a house was around €1,350,000, more than double the average price in the north of the country. For houses, the median prices by region were systematically lower than the average prices by geographic area, indicating a strong asymmetry in the distribution of selling prices.

After a fairly marked reduction in the number of transactions in the second quarter of 2020 (largely during lockdown), the third and fourth quarters were marked by a rebound in activity in the residential real estate market. The level of activity in the fourth quarter of 2020 was even higher than that observed for the same period in 2019. Over the whole of 2020, the health crisis therefore had only a relatively limited impact on activity: transactions that could not be carried out in the first and especially in the second quarter of 2020 were largely offset by increased activity in the third and fourth quarters of 2020 compared to previous years.

In addition, over the whole of 2020, activity on the market for the sale of building land increased by 6.2% compared to 2019. This upturn in activity on the land market residential building could translate into an increase in the number of new construction projects in the medium term.