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Estate market“Access to property is increasingly difficult in Luxembourg”
LUXEMBOURG – Falling sales, rising rental market, cautious investors… the real estate market experienced a very mixed year in 2022.
The Luxembourg real estate market had a turbulent year.
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In its annual study, the real estate specialist JLL takes stock of the Luxembourg market in 2022 and delivers its forecasts for the year 2023. “Access to property is increasingly difficult in Luxembourg” declared Robby Cluyssen , Director Residential Agency at JLL Luxembourg.
The decline in purchasing power dedicated to real estate has caused the number of sales to fall by 16% over the past six months, suffering from the significant increase in interest rates. “Investors have been more cautious or even absent from the market as high interest rates, inflation and limited yield (often below 3%) stifle interest in residential property investment and incentivize be careful when acquiring a property,” emphasizes JLL.
For example, the borrowing capacity of private investors has decreased by nearly 200,000 euros in one year, for a monthly payment of 3,200 euros (from 887,083 euros in January 2022 to 683,330 euros in December 2022). But the fall in sales had the effect of slowing down speculation considerably.
Shortage of housing and rising rents
Evidenced by the sharp decline in building permits of 27% during the first nine months of 2022, compared to the same period in 2021. ‘residential real estate, but it’s not the end of it,’ says Robby Cluyssen. The latter also highlights the good shape of the rental market, which benefited from the reorientation of demand.
This, however, might contribute to a shortage of housing and portends a further increase in rents which, combined with the stabilization of sales prices, should support returns. Finally, JLL believes that the disputed reform of the rental lease might increase the uncertainties of landlords regarding the future return of their investments in residential real estate. According to the specialist in real estate advice, being a lessor involves more risks than in the past.
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(yb)