2023-10-23 13:55:00
With the significant rise in interest rates in recent months, more and more Luxembourg residents are turning to the rental market, which is experiencing growing success. But how is the latter structured and what is the profile of Luxembourg tenants?
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The latest CBRE survey on the residential rental market in Luxembourg provides several answers. The corporate real estate consultancy group surveyed 506 tenants between April and August 2023 regarding their situation.
37% of tenants live alone
The first lesson to emerge is that three quarters of households (74%) who rent accommodation are made up of one or two people. 37% are single and 34% say they are in a relationship. 61% of tenants only have one income per household. Almost half of these households (46%) say they receive an annual gross income between 40,000 and 80,000 euros. Among households with two incomes, 46% earn more than 100,000 euros per year, an increasing trend according to CBRE. Between the lines, we must read that even for higher incomes, access to property therefore seems to become more and more difficult. The average duration of a rental in Luxembourg is 3.8 years.
When it comes to types of rental accommodation, apartments largely dominate the market. They represent three quarters of rented homes. Then follow the studios (11%). Rental houses are rarer in Luxembourg and only constitute 9% of the rental market: 5% for individual houses and 4% for terraced dwellings. Student rooms represent 4% of all rented accommodation. Statec and the Housing Observatory recently indicated that furnished rooms are becoming more and more popular in the country.
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The majority of tenants surveyed (59%) live with their household, most of the time their family. 27% live alone. CBRE notes that “given the cost of living in Luxembourg, people who live alone are on average older and have higher incomes.” Only 10% of respondents share an apartment with people who are not part of their household and 3% live in an organized shared accommodation. A solution that many expatriates in the country are turning to.
Modest-sized housing
CBRE notes in its survey that “rented accommodation in Luxembourg is modest in size (85m²).” Nearly a third of rental residences “have a surface area of between 50 and 74m², excluding outdoor spaces.” More generally, three quarters of rented accommodation has a surface area of less than 100 m². The size of the residence varies mainly according to the size of the household, and not in relation to the declared income, which is a somewhat surprising finding, underlines CBRE. The average surface area of a home for people with lower incomes is 76m² compared to 94m² for tenants in the highest income bracket. Around 72% of rented accommodation is unfurnished and 28% is furnished.
Survey respondents were also asked regarding the improvements made to their home for which they would be willing to pay more. 43% of those questioned regret that their accommodation does not have a garden (for 22%) or a terrace (for 21%). As the car remains king in the Grand Duchy, 15% of tenants would be willing to pay more to have a parking space. On the other hand, a space to store your bike only interests 2% of respondents.
The price of accommodation is a determining factor in the choice of rental (see below). According to the survey carried out by CBRE, the average rent (calculated on all types of rentals) reaches €1,497/month, to which must be added €193/month of charges. Unsurprisingly, the most affordable accommodation is studios (€1,086/month rent excluding charges) while detached houses have the highest rents, i.e. €2,022/month, excluding charges.
The price of housing is what worries tenants the most
What is the main concern of future tenants when choosing accommodation to rent? The survey shows that price is by far what concerns people the most when looking to rent a property. 87% of those surveyed say this factor is extremely or very important. This is 10% more than the figures from the survey carried out in 2022. “The combination of continued growth in interest rates and the pressures exerted on prices by high inflation thus contributes to greater sensitivity among tenants at prices,” notes CBRE.
The second most important factor is security. 71% of tenants consider this aspect to be extremely or very important. A percentage increase compared to last year. Tenants also place great importance on public transportation.
At the bottom of the ranking, we find the environment and energy efficiency. CBRE notes that it is “surprising to see that being located close to shops and services is not ranked very highly. This might be explained by the relative accessibility of these amenities in the residential areas of Luxembourg.”
The desire to become owners remains strong among tenants, even if it has decreased slightly compared to last year. More than three quarters of tenants would prefer to buy a home rather than rent it. In 2022, 83% of them had expressed a desire to buy. “Households with children are most keen to buy a home, while couples without children are most happy to rent.”
Unfortunately, the survey reveals that there are sometimes numerous obstacles to accessing property. Thus, 42% of respondents indicate that they do not have sufficient funds to purchase housing. And nearly 21% of them cannot afford to pay the monthly payments on a mortgage loan. The other reasons most often cited by survey respondents were high prices followed by rising interest rates.
Teleworking: stop or still?
Three and a half years following the start of the covid-19 pandemic, more than 30% of Luxembourg residents continue to telework. When asked regarding the question in the CBRE survey, almost a third of respondents indicated that they would like to work two days a week from home. This is 2% more than in 2022. One in eight people would like to work from home every day of the week, while 16% no longer want to telework at all.
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