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Luxembourg's property market shows signs of stabilization after a recent correction period. Residential property prices experienced a decline of 1.5% year-on-year as of Q2 2025, but recent data indicates the market is recovering with renewed buyer confidence and government support measures.
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Luxembourg's residential property market is stabilizing after experiencing price corrections in 2024-2025, with current apartment prices averaging €11,800-€12,200 per m² in Luxembourg City and €8,200-€8,700 nationally.
The market shows signs of recovery with transaction volumes rebounding strongly, mortgage applications surging 33% in Q2 2025, and government incentives supporting both buyers and construction activity.
| Market Indicator | Luxembourg City | National Average | Current Trend |
|---|---|---|---|
| Apartment price per m² | €11,800-€12,200 | €8,200-€8,700 | Stabilizing after -1.5% YoY decline |
| House price per m² | €6,100-€6,138 | €5,900+ | +3.5% to +4.6% growth |
| Average selling time | 4-5 months | 4-5 months | Normalized from peak years |
| Rental yield (gross) | 3-3.5% | 2.6-3% | Slight improvement |
| Mortgage rates (fixed) | 3.2-3.5% | 3.2-3.5% | Down from 4.5% peak in 2023 |
| Housing cost burden | 23.5-26% of income | 23.5-26% of income | +3.8 pp increase since 2020 |
| Transaction volume growth | +51% existing apartments | +77-108% YoY late 2024 | Strong rebound after 2023 decline |
How fast are residential property prices in Luxembourg rising or falling compared to last year?
Luxembourg residential property prices fell by 1.5% year-on-year as of Q2 2025, marking a correction period after years of strong growth.
Luxembourg City experienced a sharper decline of 5.2% year-on-year between May 2024 and May 2025, but recent quarterly data shows stabilization with a 1.9% quarter-on-quarter increase.
The national market shows varied performance by property type, with houses actually gaining 3.5% to 4.6% year-on-year while apartments faced steeper corrections. New build properties have been particularly affected, with off-plan sales remaining the weakest market segment as of September 2025.
Recent monthly indicators suggest the correction phase is ending, with price stability emerging in most regions and property categories.
It's something we develop in our Luxembourg property pack.
What is the current average price per square meter for apartments and houses in Luxembourg City versus the rest of the country?
Apartment prices in Luxembourg City currently average €11,800 to €12,200 per square meter as of September 2025.
The national average for apartments stands significantly lower at €8,200 to €8,700 per square meter, showing a clear premium for the capital city location. Old apartments nationally average around €7,790 per square meter, while new build apartments reach €10,411 per square meter.
Houses show less dramatic regional variation, with Luxembourg City house prices averaging €6,100 to €6,138 per square meter. Nationally, existing houses average €5,905 per square meter, while new build houses command €10,411 per square meter.
The price differential between Luxembourg City and the rest of the country represents approximately a 40-45% premium for apartments, reflecting the capital's economic importance and limited land availability.
How many new housing units are being built annually, and is construction keeping up with population growth?
Luxembourg needs between 5,600 and 7,500 new housing units annually to meet current demand, but construction activity has consistently fallen short of this target.
Building permits and construction activity increased by approximately 10% since 2023, triggered by government incentives and lower interest rates, but supply still struggles to match demand.
The country's population grows by about 1.5% yearly, adding roughly 10,000 new residents annually, while housing completions often lag behind this demographic pressure. This persistent supply-demand imbalance has been a key driver of high property prices over the past decade.
Government initiatives including temporary tax reductions and construction subsidies aim to accelerate housing development, but the construction sector faces challenges including labor shortages and regulatory complexities.
What percentage of household income is currently spent on mortgage repayments or rent in Luxembourg?
Luxembourg households currently spend between 23.5% and 26% of their disposable income on housing costs, including both mortgage payments and rent.
This represents a significant increase of 3.8 percentage points since 2020, reflecting the impact of rising property prices and rental costs on household budgets. For low-income groups, the housing cost overburden rate reaches 26.6%, though this has improved from earlier peaks.
The current housing cost burden places Luxembourg above the European Union average of 19-23% of household income, indicating affordability challenges for many residents.
Despite high housing costs, Luxembourg's strong average salaries and favorable tax system help maintain relative affordability compared to other major European financial centers.
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How much have mortgage interest rates increased in Luxembourg over the past two years?
Fixed-rate mortgage interest rates in Luxembourg peaked at 4.2% to 4.5% in 2023 but have since declined to current levels of 3.2% to 3.5% as of September 2025.
The rate trajectory followed European Central Bank policy, with rates rising sharply from historic lows near 1-2% in 2021-2022 to their 2023 peaks before moderating in 2024-2025.
Recent ECB rate cuts and market stabilization have contributed to the current decline, making mortgages more accessible compared to the 2023 peak period. Variable-rate mortgage products have seen particular revival as buyers anticipate further rate reductions.
The current rate environment represents a significant improvement from the 2023 peak, though rates remain well above the ultra-low levels seen during the pandemic period.
What is the current average time it takes to sell a property on the Luxembourg market?
Properties in Luxembourg currently take an average of 4 to 5 months to sell as of mid-2025.
This selling timeline reflects normalized market conditions with cautious but steady buyer interest, representing a lengthening compared to the peak years when properties sold much faster. The current timeline indicates a more balanced market between buyers and sellers.
Premium properties in Luxembourg City and well-located homes tend to sell faster, while off-plan new developments face longer marketing periods. Market conditions vary by property type, with existing apartments and houses showing more consistent buyer interest than new construction projects.
The 4-5 month average represents a healthy market dynamic, allowing buyers sufficient time for due diligence while ensuring properties don't languish unsold for extended periods.
Are foreign buyers still purchasing Luxembourg property at the same rate as before, or has demand from abroad slowed?
Foreign nationals remain highly active in Luxembourg's property market, comprising 47% of the country's total residents and maintaining steady demand despite recent price corrections.
International buyer demand continues to be supported by Luxembourg's role as a major financial center and ongoing migration flows, with foreign buyers showing consistent interest across different market cycles.
The resilient financial sector and Luxembourg's attractiveness to international professionals sustain demand from abroad, preventing the sharp foreign buyer withdrawal seen in some other European markets. Cross-border workers from neighboring countries also contribute to sustained international demand.
Government policies have not specifically targeted foreign buyers with restrictions, unlike measures implemented in other European countries, helping maintain Luxembourg's openness to international property investment.
It's something we develop in our Luxembourg property pack.
How much has the number of new mortgage applications in Luxembourg dropped compared to last year?
New mortgage loan issuances surged by 33% in Q2 2025 compared to the previous year, representing a dramatic reversal from earlier decline periods.
| Period | Mortgage Application Trend | Key Drivers |
|---|---|---|
| 2023 | Significant decline | High interest rates, price uncertainty |
| Early 2024 | Continued weakness | Market correction, buyer hesitation |
| Q2 2025 | +33% surge vs. previous year | Lower rates, government incentives |
| Current trend | Strong rebound | Market stabilization, improved sentiment |
| Variable-rate products | Particularly strong revival | Rate cut expectations |
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Luxembourg versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What is the rental yield landlords can expect today versus five years ago in Luxembourg?
Current gross rental yields in Luxembourg range from 3% to 3.5% in central areas, showing stability and slight improvement compared to the 2.6% to 3% range observed five years ago.
The yield improvement reflects slower property price appreciation combined with rising rental rates, creating a more favorable environment for landlords. Average rents now stand at €29.7 to €34.5 per square meter per month, up 4.9% to 9.6% year-on-year.
Rental demand remains strong due to continued population growth and affordability challenges for homebuying, supporting both occupancy rates and rental price growth. The rental market benefits from Luxembourg's employment growth and international workforce.
Compared to five years ago when yields were compressed by rapid price appreciation, current market conditions offer more balanced returns for rental property investors.
How much have housing transaction volumes decreased or increased quarter by quarter over the past two years?
Housing transaction volumes experienced a significant rebound after declining in 2023, with dramatic quarter-on-quarter growth in late 2024 and early 2025.
Existing apartment sales increased by 51% and new build (VEFA) homes rose by 38% in 2024, with some quarters showing exceptional growth of up to 174% for new units. Existing houses saw a 77% increase while existing apartments jumped 108% year-on-year by late 2024.
The quarterly progression shows a clear recovery pattern: sharp decline in 2023, bottoming out in early 2024, followed by strong rebounds through late 2024 and into 2025. Transaction volumes have now returned to healthy levels after the correction period.
The volume recovery reflects renewed buyer confidence, improved affordability due to lower rates, and government incentives that successfully stimulated market activity.
Are government policies or subsidies for housing in Luxembourg likely to cool down or support the market in the short term?
Luxembourg government policies are currently designed to support rather than cool the housing market, with most measures focused on stimulating construction and homebuying activity.
- Temporary 50% reduction in registration tax for homes purchased between October 2024 and June 2025
- Extended tax credits for first-time homebuyers and young families
- Construction subsidies and incentives to accelerate new housing development
- Targeted support for affordable housing projects
- Planning reforms to streamline development approvals
The government's approach prioritizes addressing housing shortages through increased supply rather than demand-side cooling measures like foreign buyer taxes or mortgage restrictions seen in other countries.
Short-term outlook indicates continued supportive policies as authorities focus on housing accessibility and supply issues rather than price containment.
It's something we develop in our Luxembourg property pack.
What do local banks and financial regulators forecast for property prices in Luxembourg over the next 12 to 24 months?
Local banks and financial regulators forecast modest price increases of 2% to 4% annually through 2026, assuming continued population growth and stable lending conditions.
The OECD and Luxembourg financial authorities predict continued market stabilization with moderate growth, especially as interest rates ease and buyer confidence returns. Most forecasts anticipate price increases in the 2% to 4% range for 2025-2026.
Expert consensus suggests the correction phase is ending, with renewed affordability and improved market sentiment supporting gradual price recovery. The outlook assumes stable economic conditions and continued population growth of approximately 1.5% annually.
Financial regulators emphasize that price growth will likely remain moderate compared to the rapid appreciation seen in previous decades, reflecting a more mature and balanced market.
Conclusion
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.
Luxembourg's property market appears to be stabilizing after a correction period, with government support and improving economic conditions creating a more balanced environment for both buyers and investors.
The combination of moderate price forecasts, recovering transaction volumes, and sustained international demand suggests the market is finding its equilibrium rather than experiencing a bubble burst.
Sources
- Immotop Luxembourg Real Estate Prices Q2 2025
- Chronicle Luxembourg Property Price Analysis
- Elle Real Estate Market Report 2025
- RTL Today Luxembourg Housing Market
- Zeas Real Estate Market Perspectives
- ATOZ Luxembourg Budget 2025
- Euronews European Housing Costs
- Trading Economics Luxembourg Housing Costs
- Pret Immo Luxembourg Mortgage Rates
- Next Immo Interest Rate Outlook