REAL ESTATE MORE EXPENSIVE, BUT LESS ATTRACTIVE

The latest figures from the Housing Observatory show a very paradoxical situation. While the number of real estate transactions fell considerably in one year, housing prices continued to rise.

Victim of the rise in interest rates and inflation in construction prices, real estate activity experienced a very marked slowdown during the third quarter. According to the latest report from the Observatoire de l'Habitat, it was mainly new buildings that paid the price: the number of off-plan apartments sold fell by 36.4% between the 3rd quarter of 2021 and the 3rd quarter. 2022. In fact, only 297 new apartments were sold this quarter. Unheard of since 2009! The observation is the same, on the side of the old, even if the phenomenon is less obvious. 1,010 transactions were concluded on the second-hand apartment market, a decrease of only 10%.

Sales of houses and even those of building land also slowed (-12.6% and – 25.1%). The number of these transactions (760 and 406) is also much lower than that of the years preceding the health crisis.

However, the financial volume has not really suffered from this sluggish real estate activity. 907 million euros corresponds to the financial volume of apartment sales in the 3rd quarter of 2022, a little over 800 million to that of house sales and 280 million to that of land. Admittedly, the sums garnered by these real estate sales are down compared to 2021 (-13.4% for apartments, -3.5% for houses and -25% for land), but, in view of the sales made , financial losses could have been expected.

The reasons for this dichotomy can simply be explained by the still high prices of housing in Luxembourg. Between the 3rd quarter of 2021 and the 3rd quarter of 2022, they indeed increased by 11.1%. +8.3% for existing apartments, +7.9% for existing houses and even +18.3% for apartments under construction. If the Observatory of Habitat notes that the evolution of the prices of the old is more moderate than in previous years, it is surprised by the "abnormal" increase in prices in VEFA, while advancing an explanation. According to the organization, this latest explosion in new home prices is based on the fact that the majority of developers did not wish to lower the selling price of their marketed properties.

The future looks a little different. Still according to the Observatoire de l’Habitat, the data for the 4th quarter of 2022 could highlight a sharper slowdown in prices on the Luxembourg real estate market.