Housing measures applied in 2024 will not be extended

Real estate professionals gathered yesterday at the Forum da Vinci at the invitation of Wortimmo, in the presence of Claude Meisch, the Minister of Housing. The conference, titled "Real Estate: the Government Facing its Responsibilities", was organized to address important topics related to the housing crisis in Luxembourg.

During his speech, the Minister responded to numerous questions asked live by professionals who mainly wanted to know what measures the state plans to implement to stimulate housing acquisition in Luxembourg by residents and investors. “Some fiscal measures have been introduced to encourage private purchases and investment in real estate, but so far they haven't achieved the expected success. These measures are time-limited, and the end of the year is approaching, so I encourage potential buyers to take advantage of them…”

In response to a question about a possible extension of these measures beyond 2024, the Minister said: “I don’t believe in extending the current measures because we have seen that they have not yet produced the reaction we expected. I think all players must make an effort so that we can restore balance between interest rates and prices.”

This topic concerns all real estate professionals in Luxembourg, who are facing an unprecedented crisis that has led to a drastic drop in the number of transactions, as well as a 16% decrease in prices for existing properties and a 10% decrease for new constructions (according to notary deed statistics from the second quarter of 2024). Professionals on the ground observe an even steeper decline, though it is still not enough to unlock the market. “Despite the measures in place, we see a recovery in transactions for existing properties, but buyers and investors remain hesitant about purchasing new real estate. And I think it will only work if we restore a balance between interest rates and prices. Interest rates will probably not return to previous levels and are likely to remain around 3%. Therefore, a price adjustment is necessary in the short and medium term in Luxembourg, as we cannot indefinitely subsidize the difference between financing costs and housing prices.”

“The market must move on its own, and project prices must fall. I am aware that some developers bought land at too high a price. A few years ago, we were all in a different world, believing that prices could increase by 8, 10, or 12% per year. But we have all seen that the market cannot sustain such price increases and growth year after year. A rebalancing was necessary. I believe that investors will wait for the ideal moment when prices have dropped sufficiently, hitting rock bottom, and may begin to rise slowly. This will coincide with a time when interest rates have fallen, and there is a sense that they won't drop much further. Once these conditions are met, the market could recover very quickly.”