Buying real estate in Luxembourg?

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Is it a good time to buy a property in Luxembourg in 2024?

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property market Luxembourg

Everything you need to know is included in our Luxembourg Property Pack

Are you thinking of investing in property in Luxembourg? Are you pondering if it's the right time to buy or if you should wait until next year?

Various opinions exist regarding market timing. Your Luxembourgish friend may suggest that it's currently a good time to buy property, but your business partner in Luxembourg City might advise waiting for better opportunities.

At Investropa, when we create articles or update our pack of documents related to the real estate market in Luxembourg, we prioritize evidence-based work, relying on reliable data and statistics rather than personal opinions or rumors.

We have thoroughly examined all the official reports and statistics available on government websites. Now, we have a comprehensive database of reliable information and we can help you determining whether it is currently advantageous to purchase real estate in Luxembourg.

Happy reading, and let's dive in!

How is the property market in Luxembourg these days?

Luxembourg is, today, an exceptionally stable country

Positive

Choosing a country with a stable real estate market is crucial as it offers a solid foundation for property appreciation and reliable returns on investment. It is an information you need as a foreigner who might buy a property in Luxembourg.

You probably already know that Luxembourg is an extremely stable country. The last Fragile State Index reported for this country is 20, which one of the highest scores in the world.

Luxembourg has a strong economy and a stable government, both of which have contributed to its current stability. Additionally, the country has a long history of neutrality and peaceful relations with its neighbors, which has helped to maintain its stability over time.

All good for the stability. Now, let's redirect our attention to the economic forecast.

Luxembourg will keep growing steadily

Positive

Before buying real estate, assess the economic situation of the country.

According to the IMF's estimations, Luxembourg is likely to finish 2023 with a growth rate of 1.1%, which is not bad. For 2024, we're talking 1.7%.

This steady growth might keep going since Luxembourg's economy is expected to increase by 8.9% during the next 5 years, resulting in an average GDP growth rate of 1.8%.

A moderate growth rate in Luxembourg is a good thing for property investors because it suggests that the market is stable and that there is potential for steady, long-term growth. Additionally, a moderate growth rate may mean that property prices are not rising too quickly, making it easier for investors to make a wise investment.

Let's now look at other metrics.Luxembourg gdp growth

Luxembourgish business owners show concern regarding the economy

Negative

Although the GDP forecast is an important metric, being based on foreign institutions, it may not fully capture the local sentiment in Luxembourg. Thankfully, in Luxembourg there is an official metric that is regularly reported. This doesn't apply to every country, so we're in luck.

Measuring business leaders' confidence in the current and future economic conditions, the metric known as the Business Consumer Index (BCI) is derived from surveys and assessments.

The Global Economy reports that the Business Confidence Index has reached a value of -25 for Luxembourg.

There is a significant decline in revenue for Luxembourg firms working on the capital markets. Also deal activity is declining and M&A firms are not at their best.

A year ago, business operators were not very confident either. The BCI score was at -2.

A lack of confidence among local businesses in Luxembourg can dampen the property market, leading to decreased investment and slower property price appreciation. Buyers may encounter limited options in the market and face challenges in finding motivated sellers or securing favorable financing options.

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buying property foreigner Luxembourg

Luxembourg is providing less building permits

Negative

If you're thinking of investing in property in a country, the count of permits issued for real estate projects can help inform your decision. When more building permits are granted, it suggests that the property market is thriving and offers promising opportunities.

Unfortunately, the number of building permits granted is falling in Luxembourg.

Throughout the previous 12 months, according to STATEC, Luxembourg, the number of building permits delivered by the Luxembourgish municipalities fell by 20.3%, from 6,080 to 4,843 units.

Clearly, this is a negative sign. Let's explore further data.

One last point to consider - a decline in building permits directly affects the availability of properties. In such a situation, it is probable that housing prices will see an increase in Luxembourg in 2024.

Luxembourg's property market experiences relentless and soaring growth.

Positive

Luxembourg's home prices have increased by 67.0% in 5 years according to eurostat.

It means that if you had bought a penthouse in Luxembourg City for $1,000,000 five years ago, then it would now be worth around $1,670,000.

In recent times, Luxembourg's property market has showcased uninterrupted and accelerating growth. Property values have consistently increased, while market dynamics have intensified, signifying a buoyant and dynamic real estate sector within the country.

If you're thinking about buying a property in Luxembourg, that's a good sign. The market is active and growing. However, it might be a good idea to wait for prices to go down before you make your investment. That way, you can get a better deal.

You can find a more detailed analysis of the real estate prices in our property pack for Luxembourg.Luxembourg housing prices real estate

Everything you need to know is included in our Luxembourg Property Pack

Luxembourg's population is growing and getting (a bit) richer

Positive

When considering a real estate purchase, pay attention to population growth and GDP per capita because:

  • a growing population means more people needing homes
  • a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Luxembourg, the average GDP per capita has changed by 1.2% over the last 5 years. Though not substantial, there is still a positive trend of growth. Furthermore, the Luxembourgish population is growing (+3% in 5 years).

This means that, if you purchase a modern apartment in Luxembourg City and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.

If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be an increase in rental demand in Luxembourg in 2024.

Properties promise modest rental yields in Luxembourg

Neutral

Rental yield is a popular tool for assessing real estate investments.

It's the annual rental income of a property divided by its price. For example, if a Luxembourg property is purchased for €500,000 and generates €30,000 in annual rental income, the rental yield would be 6%.

The website Numbeo indicates that rental properties in Luxembourg promise gross rental yields from 1.6% and 4.3%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Luxembourg.

It suggests a satisfactory level of income relative to the property's value.

As we mentioned before, the amount of available real estate will stay the same (and housing prices may be stable), but more wealthy people will be looking to rent properties. Then we can conclude that rental yields might increase in Luxembourg in 2024.

Luxembourg rental yields

Everything you need to know is included in our Luxembourg Property Pack

In Luxembourg, inflation is anticipated to be moderate

Neutral

In two words, inflation is when costs increase.

It's when your typical plate of Luxembourgish gromperekichelcher costs 10 euros instead of 8 euros a couple of years ago.

If you're considering investing in a property, high inflation can bring you several advantages:

  • Property values tend to increase over time, potentially leading to capital appreciation.
  • Inflation can result in higher rental rates, increasing the property's cash flow.
  • Inflation decreases the real value of debt, making mortgage payments more affordable.
  • Real estate can act as a hedge against inflation, helping preserve the investment's value.
  • Diversifying into real estate provides stability during periods of inflation.

In accordance with IMF projections, the inflation rate in Luxembourg will increase by 12.4% over the next 5 years, with an average annual increase of 2.5%.

This data shows that Luxembourg could experience a moderate rate of inflation in the future. Then, prices would rise. It might become more expensive to buy in the future. However, if you buy now, your investment might appreciate and you can sell for a higher value later.

Is it a good time to buy real estate in Luxembourg then?

Now it's time to draw our conclusions.

Considering the available signals, 2024 might not provide the most favorable conditions for property investment in Luxembourg, as a mix of unfavorable indicators outweigh the positive ones. Despite Luxembourg's exceptional stability and projected steady growth, certain factors warrant caution. The relentless and soaring growth of the property market, while initially attractive, raises concerns about potential market instability and overheating.

Furthermore, while the country's population growth and increasing prosperity are positive aspects, the concern expressed by Luxembourgish business owners regarding the economy introduces significant uncertainty. This sentiment could lead to reduced economic activities and potential job losses, impacting both the real estate market and the overall investment climate.

In addition, the decrease in building permits provided by Luxembourg points towards a potential contraction in new property developments. This shortage in supply could lead to stagnation in the market and possibly inflated property prices, which could make the investment landscape less attractive for potential buyers.

While some neutral factors, such as modest rental yields and moderate inflation, offer stability, the overall negative signals, including economic concerns and fewer building permits, suggest that 2024 might not be the optimal time for property investment in Luxembourg. Prospective investors should carefully evaluate these indicators before making any investment decisions.

We sincerely hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Luxembourg.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

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