House prices in Luxembourg increased by 9.6% in 2022 as a whole, a lower growth rate than in previous years. However, they fell between the third and fourth quarters, as did the number of transactions.
Prices for existing houses fell by 1.9%, for existing flats by 2.3% and for existing apartments by 1.4%. The price index for apartments under construction also fell by 0.3%.
If we compare prices in the fourth quarter of 2022 with those of the same period in 2021, they have risen by 5.6%. In one year they have risen by 4.4% for old dwellings, 9.4% for new dwellings and 3.8% for houses. However, these figures correspond to the house price index calculated by Statec on a "constant quality" basis, which neutralises changes in the structure of the properties sold.
Number of transactions down
The number of transactions also fell by 14.4% in 2022, with 1,269 flats sold in the fourth quarter of the same year, a 30.4% decrease compared to the same period in 2021. The financial volume of these transactions also fell by 32.5% to 843 million euros.
These transactions, recorded on the basis of the passage of the deed, are based on compromises signed between June and August 2022. To know the real impact of the 2022 transactions (compromises signed in the last quarter), we will have to wait for the figures for the following quarter, which will give us a real indicator of the situation in 2022: a decline in sales that accelerates and is confirmed at the end of the year.
Rising interest rates: the trigger
Despite the fall in property transactions, sales prices remain a major concern for buyers, with annual increases of more than 12 to 13%. These price increases and rising interest rates are eroding buyers' purchasing power.
For example, for every percentage point rise in interest rates, buyers lose 10% of their purchasing power. Banks are also asking for more collateral than before, which puts a heavy burden on buyers.
The residential property market, whether houses or flats, new or old, is affected by this decline. However, the decline is more pronounced for VEFA properties, which are offered at very high prices.
A special interest in rental: an opportunity for investors
Rental costs have been rising in the rental sector, a trend that has reversed in recent years. "We see the first signs of an increase in rents for new leases at the end of 2022," says Statec. Rents rose by 2.1% in a quarter and 8% in a year for apartments, and by 4.8% in three months and 6.9% in 12 months for houses.
This crisis in the property sector could easily become a boon for investors, as interest in renting is on the rise: unable to buy, buyers are turning to the rental market to wait for better times.
To take advantage of our investment opportunities, contact Secretimmo. We support our investors by offering them safe and profitable off-market property investments with guaranteed rents.
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