On Tuesday 27 June 2023, Luxembourg's Housing Observatory published its report on the residential real estate market in the first quarter (Q1) of 2023.
The report noted a sharp drop in activity over the last twelve months, particularly for apartments under construction (-72.5% compared to Q1 2022), but also for existing apartments (-41.5%), houses (-42.9%) and building land (-41.4%). The Housing Observatory attributed this sharp decline in activity on the apartments under construction market to a decline in the appeal of rental investors and in the purchasing power of first-time buyers, in both cases due to higher interest rates, as well as uncertainties about the future price of a home purchased off-plan, due to higher construction prices.
At the same time, selling prices dropped by 1.5% compared to the first quarter of 2022. This decrease particularly affected existing houses (-4.3% over twelve months), while prices were more stable for existing apartments (+0.4%) and apartments under construction (-0.4%). Following a slowdown in the rise in prices in the previous quarter, this marks the first drop in prices over one year since the third quarter of 2009 (a period marked by the consequences of the global financial crisis).
Advertised rents for apartments for new tenants rose by 11.1% over the past year, an increase that was significantly higher than the inflation rate (4.2%) for the same period. Existing rents went up by 1.7% during the same period.
