Luxembourg's Housing Observatory recently published its report about the residential real estate market in the third quarter (Q3) of 2022.

The following main observations were made:

  • the evolution of prices was marked by the surge of inflation. In 2020, the rise in housing prices reached around 15% over twelve months, with inflation limited to 2.5%. In Q3 2022, the rise in housing prices reached 11.1%, but inflation on consumer goods amounted to 6.7%;
  • the continued rise in sale prices remained particularly marked for sales of off-plan apartments with an increase of 18.3%, while the volume of transactions in this segment fell by 36%.

Real estate prices

Price developments on the real estate market in Q3 2022 were marked in particular by the following trends:

  • a sharp drop in the number of transactions over the last twelve months, particularly in the segment of apartments under construction (down 36% compared to Q3 2021), but also in existing apartments (down 10%), houses ( down 13%) and building land (down 25%);
  • a continued rise in selling prices, even over one quarter: up 8.3% for existing apartments, up 7.9% for old houses and up 18.3% for off-plan property compared to Q3 2021.

According to the Housing Observatory, the 18.3% increase in off-plan sales can be put into perspective: the sharp fall in the volume of sales and the change in the contracting system by certain promoters have had an unquantifiable effect on this increase. Off-plan deeds of sale were generally no longer based on the STATEC construction price index, but at a fixed price. This allowed buyers to have certainty as to the cost of the investment. In return, the sellers included the inflation to be expected in the price offered.

The Housing Observatory concluded from the fall in off-plan sales volumes that the majority of property developers chose not to lower the sale prices of properties on the market, even if it meant facing difficulties in selling them. They therefore preferred (at this time) not to sell new projects at a lower price.

Considering the current economic context, the surge in inflation is leading to a greater deceleration in house prices in real terms. In 2020, the rise in house prices reached around 15% over twelve months, with inflation limited to 2% or 2.5% (corresponding to a change in real prices of 12.5%). In Q3 2022, the rise in housing prices reached 11.1%, but in a context of inflation on consumer goods which amounted to 6.7%. In conclusion, the real estate index rose by only 4.1%.

The Housing Observatory also noted the slowdown in the indicators of advertised prices: an increase of only 1.6% for apartments and of 3.5% for houses over twelve months (declines over one quarter in both cases). It is therefore possible that this slowdown will be visible in the prices of notarial deeds in Q4 2022.

Advertised rents

Here, the increase was slightly stronger: up 4.7% over twelve months for the indicator of advertised rents for apartments, with in particular an increase of 2.1% in Q3 2022 alone. However, this increase in advertised rents remained lower than inflation on consumer goods (up 6.7% between Q3 2021 and Q3 2022).