Strong trends are emerging in the property sector in Luxembourg. Analysts advise market players to take these prospects into consideration when planning for the coming years.

More rapid development than predicted

Throughout the last ten years, the Luxembourg property market has experienced quicker development than that of several other European countries. Recently, PwC Luxembourg undertook a study to ascertain the likely evolution of the property sector over the next five years.

The following six predictions emerged from their analysis:

The residential and commercial property market will experience growth of between 60 and 50%; this began in 2012 and is likely to continue until at least 2020. This growth is the result of economic development, and the increased demand for office space and labour.

If the trend for economic growth continues at its current pace, companies will need even more office space.

Transport infrastructures and mobility will need to be quickly adapted to the predicted population growth and increased numbers of cross-border workers.

New residents are already optimising the rental market in Luxembourg City (and its municipalities); given that the number of low-income Luxembourgish citizens has risen, it is likely that they will move to the periphery or to neighbouring countries.

During recent years, a decrease in household size has been observed in Luxembourg. This trend could grow with the arrival of new residents. The construction of rental properties may therefore be expected to outstrip the construction of individual residences.

The property market in Luxembourg will need to adapt in response to new private and institutional investors (for example, pension funds), but the country will remain a popular destination among the wealthy.

Conclusions of the Housing Observatory

According to the latest statistics published by the Housing Observatory, an increase in property prices has been observed in Luxembourg, particularly during the last year. In 2015, rental of an 89m2 apartment cost 1,618 euros per month, and a medium-sized house cost 3,651 euros; these prices have now increased by 7%. Becoming the owner or tenant of an apartment in the Grand Duchy is now more difficult, especially for those on a small budget. With the average price of houses for sale 7.7% higher, one can expect to spend around 719,500 euros (or 3,884 euros per square metre) for a residence of 185 m2. In Luxembourg City, while the average price for a house has fallen by 1.4%, the price of an apartment has risen by 7.2%.

Measures to be taken

A makeover of the urban landscape, particularly in the city centre, will provide new opportunities for potential investors, as will development of decentralised areas such as Bertrange, Strassen, the Cloche d’Or and the periphery (Capellen, Leudelange, Windhof). Flagship projects will be welcome in a market looking to maintain its momentum. Luxembourg’s economic stability constitutes one of the fundamental pillars of the property sector, making this an attractive element to preserve in the future.

In conclusion, the property sector in Luxembourg continues to be strongly influenced by the demographic and geographic situation of this small country. Throughout the four years to come, it is likely that major new players will join the market, particularly in retail.

[i]Note: PwC Luxembourg is considered to be the leading professional services firm in Luxembourg. It employs 2,450 people from 55 different countries.