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The number of transactions has been increasing for the second consecutive quarter, and signs of an imminent recovery are becoming more apparent. Buyers are actively searching for opportunities to become property owners. Regarding prices, we observe stabilization at the national level, with decreases ranging between 10% and 30% depending on the commune. Although this drop does not entirely offset the increase in credit costs, the expected upcoming rate reductions should help achieve the much-anticipated balance.

## What profile do you need to obtain a housing loan on the best terms?

To secure a housing loan on the best terms, certain requirements remain essential: stable employment and a consistent income that is three times the credit repayment costs are primary conditions. Additionally, a substantial down payment can sometimes be a decisive factor. The energy efficiency rating of the property also plays an important role in credit rates. For example, a property with an A rating will benefit from a lower interest rate compared to a property with a D or E rating. Properties with an A rating are scarce, so their value is likely to be preserved. Conversely, properties with low energy efficiency will need to be renovated to improve their energy performance and maintain their value.

## Seasonal dynamics influenced by holidays

The weather this year has not been kind to Luxembourg residents, making the approach of holidays even more eagerly anticipated. The school year has ended, and the last affairs to settle precede the much-deserved holiday departures. Upon their return, the activity in real estate searches is expected to intensify, with the goal of finding a home or family nest. The market still offers a varied selection, and quality properties can sometimes be sold at fair prices.

## Transparency and market Information

To ensure transparency, we now display in each sales listing, provided we have reliable data, price statistics and their projections, as well as the positioning of the listing in the market. The time has come to finally find your ideal property and anchor yourself in Luxembourg.

Don't hesitate [to contact us](https://nextimmo.lu/en/contact) for any additional information or to start your search today.

Toward a real estate market recovery by fall?

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### Why taking out a variable-rate home loan now may be a good idea (and converting to a fixed rate later) 😃

In this month of June 2024, variable interest rates for home loans are higher than fixed rates. At first glance, choosing the more expensive option may seem counterintuitive, but there are valid reasons for doing so! Here's why:

#### 1. *Interest rates could go down 📉*

Although variable rates are high at the moment, it's possible that interest rates could fall in the medium term. By choosing a variable rate today, you could benefit from this future drop. Then, you can convert your loan to a fixed rate at a more opportune time, and save money over the long term.

#### 2. *More flexibility 🔄*

Variable-rate loans often offer greater flexibility for prepayment and modification of loan conditions. This flexibility is very useful when rates are high, as it allows you to adjust your loan according to your financial situation and market conditions.

#### 3. *Manage risks 🛡️*

By carefully monitoring market rates, you can decide when is the best time to convert your loan to a fixed rate. This allows you to minimize the risks associated with interest rate variations and take advantage of the best possible conditions.

#### 4. *Long-term savings 💸*

Even if variable rates are more expensive now, you could make significant savings by switching to a lower fixed rate later. This requires close monitoring of the market and careful planning, but the potential savings are well worth it.

#### 5. *Refinancing opportunities 🔄*

By choosing a variable rate today, you open yourself up to interesting refinancing opportunities in the future. If rates fall as expected, you'll be able to restructure your loan on more advantageous terms, which can improve your overall financial situation.

#### Conclusion 📊

Although variable rates are currently higher, they offer flexibility and potential opportunities that can be advantageous in the long term. By monitoring rates and planning carefully, you can reap the benefits of both types of rate. Don't forget to consult a financial advisor to choose the best strategy for you and optimize your finances!

In short, with a little vigilance and strategy, you can turn a seemingly unfavorable situation into an advantageous financial opportunity. Take advantage of this flexibility to optimize your finances! 😊

Why take out a variable-rate loan?

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The Housing Observatory has just published its 10th analysis report, providing a comprehensive overview of the residential real estate market in the first quarter of 2024. Here are the key points:

## A Still Weak Sales Market

The real estate transaction market remains sluggish, especially for new constructions. The sales volume is significantly lower than the levels seen before the late 2022 housing crisis. In the first quarter of 2024, only 92 sales were recorded, representing a 47.1% drop compared to the same period in 2023, and seven times fewer than the average of previous years (2017-2022).

Sales of apartments under construction have not been offset by purchases from the State or the City of Luxembourg, despite their announced acquisitions of projects from private developers. However, sales of existing apartments have slightly rebounded with a 24.5% increase compared to the first quarter of 2023, although activity remains below the pre-crisis average.

## Stabilization of Sale Prices

Sale prices are beginning to stabilize. The hedonic price index provided by Statec shows a minimal variation of -0.3% between the fourth quarter of 2023 and the first quarter of 2024, after a 10.9% drop over the previous year. This stabilization trend is observed in both apartments and existing houses, the latter having lost 14.7% of their value compared to the first quarter of 2023.

Prices of apartments under construction (VEFA) also fell by 2.3% this quarter compared to the fourth quarter of 2023. However, fluctuations in this segment remain volatile due to the low number of transactions.

## Stable Rents

After several quarters of significant increases, rents for apartments with new leases have stabilized since the second quarter of 2023. Over the past 12 months, rents have only increased by 1.5%, a rise lower than the consumer price index (+3.2%) over the same period. This moderation is likely due to tenants' inability to absorb large rent increases despite growing rental demand.

A notable exception is rents for furnished rooms, which currently represent 15% of the total rental offer, having increased by 4.5% compared to the first quarter of 2023, well above the inflation rate for consumer goods.






State of the Real Estate Market in the First Quarter of 2024: Summary and Trends

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**An exclusive interview with Irfan Babacic, one of Luxembourg's leading real estate developers**.

**Interviewer: Rudolphe Aben, founder of Nextimmo.lu**

**Rudolphe Aben:** Good morning, Irfan Babacic. Thank you for taking the time to speak with us today. As Luxembourg's leading real estate developer, your outlook on the real estate market is invaluable. Let's get straight to the heart of the matter. You recently made some bold predictions about the real estate market between now and the end of 2024 and in 2025. Can you explain why you think the market will rebound by the end of this year?

**Irfan Babacic:** Hello, Rudolphe Aben. I'm delighted to be here. Yes, I'm convinced that the real estate market will pick up again towards the end of 2024. One main reason is the expiry of government subsidies. Historically, we've seen similar patterns, for example at the end of 2008. At that time, the end of government subsidies and the subsequent market adjustment led to a significant increase in demand and property prices.

**Rudolphe Aben:** Can you explain this in more detail? Why do the expiry of subsidies lead to a rise in the real estate market?

**Irfan Babacic:** Of course. When government subsidies come to an end, there's often a sense of urgency among buyers and investors trying to take advantage of the last benefits before they disappear. This leads to a temporary increase in demand. At the same time, markets adjust to the new reality without subsidies, which often has a stabilizing effect. People have more confidence in market dynamics because they are no longer influenced by artificial interventions.

**Rudolphe Aben:** That's very interesting. You also mentioned that you think the market will be much better in mid-2025 than in 2023. What factors explain this optimism?

**Irfan Babacic:** There are several factors. Firstly, the market correction caused by the expiry of subsidies will be fully digested by then. Secondly, we expect interest rates to fall, which will reduce financing costs for buyers and investors. At the same time, significant wage increases in Luxembourg will increase purchasing power and make real estate more affordable. Thirdly, Luxembourg's population continues to grow, increasing demand for housing. These combined factors will stimulate the market and lead to a recovery. We see great potential in VEFA (vente en état futur d'achèvement) as buyers and investors regain confidence in the market and are ready to invest in new projects.

**Rudolphe Aben:** That sounds promising. Can you tell us a little more about VEFA and its importance for the real estate market?

**Irfan Babacic:** Of course. VEFA, or vente en état futur d'achèvement, is a very attractive option for buyers and investors. It enables them to buy properties still under construction, often at a lower price than for finished properties. This type of sale also offers developers a secure method of financing, as they receive advance payments. In times of market growth, such as we expect in 2025, VEFA becomes particularly attractive, as buyers can benefit from future increases in value.

**Rudolphe Aben:** Thank you very much, Irfan Babacic, for these detailed and enlightening explanations. Your companies are currently investing expansively. Can you explain why you're entering this expansion phase now?

**Irfan Babacic:** Of course. The market is currently in a recovery phase after a prolonged period of stagnation. We see this as a strategic opportunity to invest before prices rise significantly. By investing early, we can benefit from lower prices and be ready when the market has fully recovered and demand increases. It's a long-term strategy based on our belief that the market will recover sustainably.

**Rudolphe Aben:** Wise words. Thank you very much, Irfan Babacic, for being with us today and sharing your perspectives.

**Irfan Babacic:** Thank you, Rudolphe Aben. It's been a pleasure.

---

### About the author:

Rudolphe Aben is the founder of Nextimmo.lu, a leading hybrid real estate platform/agency. He works closely with many former competitors, who have become his partners. With years of experience in assessing market trends and advising investors, he writes regularly for leading Luxembourg trade magazines and lectures at real estate conferences.

### About Irfan Babacic:

Irfan Babacic is a well-known figure in the real estate sector and acts as leader and founder of several major real estate development companies in Luxembourg. He has extensive experience in real estate and is particularly well known for his work in participatory financing and project management. His companies are currently investing expansively, as he is convinced that the market is in a recovery phase and that now is the right time to invest.

The future of the real estate market: An exclusive interview with Irfan Babacic

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_Economists unanimously agree that the ECB will reduce its key interest rates by 25 basis points this week, marking the first much-anticipated cut in five years._

The Governing Council of the European Central Bank will meet this Thursday, June 6, to announce, for the first time in almost five years, a reduction in the eurozone banks' key interest rates. This 25 basis point cut comes despite uncertain macroeconomic conditions and persistent inflation. Experts predict several rate cuts by the end of 2024, each of 25 basis points. However, the overall reduction for this year will depend heavily on GDP growth and inflation, two elements that are difficult to anticipate at this stage, although there are signs of improvement in inflation.

If these cuts materialize, they could potentially give a boost to the still-struggling Luxembourg real estate market. While professionals note a slight improvement in the number of transactions in existing residential real estate, new constructions are struggling to find buyers. Projects are delayed due to a lack of financing, and reservations from private individuals as well as investors in new constructions remain rare.

The economic impact of this upcoming cut will be assessed soon, and based on this evolution, the schedule for further cuts will be set. The ECB has adopted a cautious approach and avoids committing to further rate cuts in advance. It will likely reduce rates gradually to maintain a consistent level of monetary restriction.

The borrowing rate is a key factor in acquiring property through a mortgage. Its drastic increase has flattened the real estate market in Luxembourg and caused an unprecedented crisis. We anticipate a rate cut of 75 basis points before the end of 2024, which should significantly ease borrowers' monthly payments.

Evolution of Mortgage Interest Rates in Luxembourg in June 2024

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On May 14, 2024, Luxembourg's Chamber of Deputies approved a new housing stimulus package. This package was developed by the Ministry of Housing and Spatial Planning and the Ministry of Finance through intensive discussions with various representatives of the housing sector. The primary goal is to facilitate access to housing and support the construction sector through various short and medium-term measures.

## Enhanced eligibility for housing assistance

More households are now eligible for various forms of assistance for renting and purchasing homes. Public investments in creating affordable housing have been strengthened. Additionally, a series of temporary tax measures—limited to the year 2024 and retroactive to January 1, 2024—have been implemented by the Ministry of Finance. These measures target homebuyers, homeowners, and investors.

## Upcoming initiatives for housing sector collaboration

Beyond this initial housing stimulus package, the government is currently discussing additional measures to enhance collaboration between the public and private sectors, aiming at administrative simplification and mobilizing private and public land for creating more affordable housing. The results of these discussions will be communicated in June.

## Increased housing assistance for more households

_"In this challenging real estate market situation affecting more and more households, it was important for us to provide more support to families. We have therefore placed particular emphasis on families with children, who are particularly suffering from the shortage of affordable housing,"_ highlighted Claude Meisch, Minister of Housing and Spatial Planning, at a press conference on May 15, 2024.

## Revised income limits for housing assistance

The income limits for all individual housing assistance have been adjusted to reflect the corrected standard of living and household composition. Income limits for single individuals have increased by an average of 6%, and those for households with children have increased by 8% to 25%, depending on the number of children.

## Enhanced support for tenants with children

The rent subsidy has been increased for households with dependent children. The amount per child in the household has been raised to 80 euros per child, up from the previous 40 euros.

## Support for homebuyers

**Homeownership subsidies:** The income limits for homeownership subsidies have been increased, making 59% of all households theoretically eligible for a homeownership subsidy.

**Interest subsidy:** The maximum rate for the interest subsidy has been increased to 3.5%. This measure helps reduce the interest burden for homebuyers and applies to both new and existing mortgages, assisting households struggling with unexpectedly high interest rates. The income limits for interest subsidy eligibility have also been raised.

**State guarantee for homeownership:** In cases where the required down payment for a mortgage is unavailable, the state can provide a guarantee under certain conditions. The conditions for this state guarantee have been improved:

- The maximum debtor rate for the guaranteed loan has been increased from 3% to 6%.

- The maximum state guarantee rate relative to the project cost has been increased from 30% to 40%.

- The income limits for state guarantee eligibility have been raised.

## Expanded eligibility for affordable and moderately priced housing

The eligibility criteria for housing created by public developers (municipalities, the Housing Fund, SNHBM) for affordable or moderately priced sales have been raised. This significantly expands the pool of potential buyers for these properties, which are sold below market prices. Currently, 70% of households are eligible to purchase affordable housing, and 80% can purchase moderately priced housing.

## Maintaining high investment levels for affordable housing creation

In addition to the measures included in the stimulus package, the state is committing substantial resources to massively invest in creating affordable housing.

**Extension and strengthening of the VEFA program:** This measure aims to increase the public affordable housing stock and support developers facing liquidity shortages who struggle to sell their housing projects. The special fund for affordable housing has been allocated an additional multi-annual budget of 480 million euros for 2024-2027.

**Increasing the special fund allocation for affordable housing:** Significant increases in the creation of public affordable housing are planned. This will support access to affordable housing and boost construction activity. According to the 2024 budget, the special fund for affordable housing will invest 1.45 billion euros (1,447,654,152 euros) over 2024-2027, averaging over 360 million euros annually, doubling the 2023 expenditure of 184 million euros.

_"The state is massively investing in public housing! This can only be achieved through good collaboration between the public and private sectors. From my discussions with all housing stakeholders in recent months, I can see that we are all moving in the same direction,"_ noted Claude Meisch, Minister of Housing and Spatial Planning.

The Ministry of Housing and Spatial Planning is planning several targeted campaigns to promote various assistance options to private market tenants and homebuyers.

For information on the tax measures implemented by the stimulus package, the public can contact the Ministry of Finance.

## Public information

To learn more about various housing assistance options, potential applicants can visit www.logement.lu for information on eligibility conditions. The Housing Assistance Service staff is available to provide information at the following location:

11, rue de Hollerich L-1741 Luxembourg

Monday to Friday from 8:00 to 12:00 and 13:30 to 16:00, Thursday from 8:00 to 17:30 by appointment only

You can also contact them by email at guichet@ml.etat.lu or by phone at (+352) 8002 10 10, Monday to Friday from 8:00 to 16:00.


New housing stimulus package approved by Luxembourg's Chamber

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_The demand for real estate purchases in Luxembourg has increased significantly since April. At the same time, banks are once again lending money, making it possible to envision oneself as a future homeowner in Luxembourg. Purchasing an existing property and buying one under construction each have their own advantages and disadvantages._

Here are some points to consider for each option:


## Buying an existing property

### Pros:

**Immediate Availability:** You can move in quickly after the purchase, which is ideal if you need housing without delay.

**Negotiable Price:** You have the opportunity to negotiate the price with the seller, depending on the market conditions and the urgency of the sale.

**Transparency: **You can visit the property and get a clear idea of what you're buying, reducing the risk of unpleasant surprises.

### Cons:

**Renovation needs:** Some existing properties may require renovation or repair work, resulting in additional costs.

**Limited options:** You might be restricted by the features and layout of the existing property, which may not exactly match your needs.

**Hidden costs:** In addition to the purchase price, you may need to pay additional fees such as notary fees, property taxes, and moving costs.

**Energy efficiency:** Existing properties are often lacking in good insulation and may be more costly in terms of energy maintenance.


## Buying a property under construction

### Pros:

**Customization options:** You have the opportunity to customize certain aspects of the design and finishes of the property according to your preferences.

**Novelty:** You get a new property, often equipped with the latest technologies and construction standards, which can reduce long-term maintenance costs.

**Guarantees:** New constructions come with construction guarantees, providing you with some peace of mind in case of structural issues.

**Energy efficiency:** New properties are typically well-insulated and have optimal energy efficiency.

### Cons:

**Waiting period:** You'll need to wait for the construction to be completed before you can move in, which can take several months or even more than a year.

**Uncertainty:** Plans and renderings may differ from reality, which can lead to disappointments.

**Risk of delays:** Construction projects sometimes face delays due to technical issues, weather conditions, or administrative delays, which can extend the initial waiting period.

**Purchase price:** The purchase price of a property under construction is typically higher than that of a similar existing property, requiring a greater financial effort from the buyer.

Whether you opt for buying an existing property or one under construction largely depends on your personal preferences, financial situation, and housing needs. Buying an existing property offers the opportunity to move in quickly and gain immediate clarity on what you're buying. However, renovations may be needed, and the available options may be limited. On the other hand, buying a property under construction offers the opportunity to customize the property to your liking but requires a longer waiting period and carries a higher risk of delays and uncertainties compared to the original plans. Therefore, it's important to carefully weigh the pros and cons of each option before making a decision.


 Buying new or existing property for your primary residence in 2024?

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**Nextimmo introduces its brand new predictive tool for assessing future prices of existing residential real estate, named "Trends 2024".** As a pioneering player in the real estate sector, the Nextimmo team is committed to leveraging cutting-edge technologies to enhance market transparency. This innovative tool is designed to forecast price trends for the upcoming quarters.

Founded in response to a sectoral crisis, this hybrid real estate agency has developed a platform dedicated to promoting mandate properties as well as offerings from its partner agencies. **This user-centric platform provides significant advantages to potential buyers by offering crucial information for informed purchasing decisions in the Luxembourg residential real estate market.**

Their team of real estate data experts has developed an analysis tool for current price trends, enabling short- and medium-term projections of prices per square meter and per commune. This tool, a first in Luxembourg, offers an accurate comparison of property positioning on the platform compared to other similar listings, thereby helping future buyers assess property attractiveness.

The Luxembourg real estate market, often criticized for its lack of transparency, has seen prices soar after the pandemic, contributing to a recent sharp correction in prices. In response, Nextimmo has leveraged publicly available data since 2016 to create detailed graphs depicting the evolution of real estate prices in Luxembourg. **These graphs illustrate price increases before their recent adjustment. Additionally, they have developed an algorithm to forecast prices per square meter per commune for 2024, where data is sufficient to establish future trends.** Nextimmo will continue to gather data to refine the accuracy of their predictions and consider integrating artificial intelligence into their future models.

This new tool is now available for existing properties in communes where there are enough listings to provide a reliable projection, accessible through sales listings on the www.nextimmo.lu platform.

**To access these indicators, simply visit the Sales section of Nextimmo and scroll down to the bottom of the listing of your choice. Currently in beta phase, this tool aims to predict listed and recorded prices over a one-year period.**

New predictive tool for existing residential real estate prices

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_If you are considering purchasing a property in Luxembourg and wondering what interest rates are currently in effect, this article will provide you with all the essential information for your future purchase or real estate investment._

Following the sharp increase in interest rates at the end of 2022, a first significant decrease was observed at the beginning of the current year. Dropping from 4.8% to 3.8%, the mortgage interest rate is becoming increasingly attractive. Some banks even offer rates of around 3.5%, provided that your dossier is solid and the property you're aiming for has a good energy class, ideally A or B.

**Choosing between fixed rates, variable rates, and revisable rates: Which is the best choice?**

In Luxembourg, various types of interest rates are available for mortgage loans:

**Fixed Rates:** The interest rate remains constant throughout the loan term. It is possible to renegotiate this rate during the loan term, but this may incur penalties to the bank.

**Variable Rates:** The interest rate varies based on fluctuations in the financial market. This type of rate was popular in Luxembourg before the sharp increase in interest rates in 2022. Since then, it has become less attractive as it is generally higher than the fixed rate.

**Revisable Rates:** The rate is fixed for a certain period (e.g., three years) and then becomes variable for the remainder of the loan term. When the revisable period expires, it is possible to renegotiate the loan and switch to a more advantageous fixed rate, provided that interest rates have decreased during this period.

Each type of interest rate has its pros and cons, and the choice will depend on your personal financial situation, risk tolerance, and outlook on interest rate movements. Before making a decision, it is advisable to consult a financial expert to assess the various options available and choose the one that best suits your needs.

The ECB forecasts a decrease in interest rates by the end of the year, and this trend could continue in the coming years. Therefore, it may be worthwhile to switch to a revisable fixed rate in 3 to 4 years to take advantage of future interest rate cuts without penalties.

Through collaboration with local mortgage brokers, Nextimmo is able to negotiate the best terms for you. Feel free to [contact us](https://nextimmo.lu/en/contact) for further information.

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