Luxembourg

Luxembourg Residential Real Estate Market Analysis 2025

Lalaine C. Delmendo
Last update:
Next update: August 2026

Luxembourg's residential property market is showing signs of recovery, supported by improving demand amidst falling interest rates. Apartment prices are rising again. Though the broader economy continues to struggle.

This extended overview from Global Property Guide covers key aspects of Luxembourg's housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

Housing Market Snapshot

During the year to Q1 2025, the average selling price for apartments rose by 3.7% to €8,094 (US$9,392) per square metre (sqm), according to the STATEC Luxembourg, the country's national statistics agency. This marked the second consecutive year‑on‑year increase after seven straight quarters of price falls.

When adjusted for inflation, the house price growth was more modest, at 2% y-o-y in Q1 2025. Yet it was in stark contrast with the y-o-y price decline of 11.5% in the same period last year.

Luxembourg's house price annual change:

Data Source: STATEC Luxembourg.

Though quarter-on-quarter, nationwide apartment prices were still down slightly by 1.2% (-2.2% inflation-adjusted) in Q1 2025.

Property prices in Luxembourg remain high, according to the International Monetary Fund (IMF). "Housing price growth, both real and nominal, has moderated but remained high even as demand has declined," said the IMF in its 2023 report.

In a later report by the IMF published in March 2024, it urged the Luxembourg government to expedite supply-side measures to allow an orderly rebalancing of the housing market.

"Given the slump in the housing sector, to reduce potentially durable disruptions to downstream activities, the government has unveiled several measures, temporary and permanent, to stimulate housing demand. These measures could help restore confidence and alleviate pressure on the construction sector," said the IMF.

"However, given supply constraints, the boost to demand is likely to result in further deterioration of households' indebtedness and affordability. Over time, these measures may lead to moral hazard and promote risk-taking. On balance, staff reiterate the importance of supply-side measures to reduce supply rigidity. Staff propose to frontload public investment in social and affordable housing in cost-efficient ways, with greater involvement of the private sector," added the IMF.

In its June 2025 report, the IMF urged the government again to address housing and infrastructure bottlenecks in the country.

By property type:

  • Existing apartments' average acquisition price fell slightly by 0.4% to €7,636 (US$8,861) per sqm in Q1 2025 from a year earlier, an improvement from a y-o-y decline of 8.6% in Q1 2024. Quarter-on-quarter, prices were down by 1.9% in Q1 2025.
  • New apartments' average price increased strongly by 10.9% to €10,289 (US$11,940) per sqm in Q1 2025 from a year earlier, a sharp turnaround from the prior year's 1.32% price fall. Quarterly, new apartment prices were up by 5.2% during the latest quarter.

Luxembourg Average Prices of Apartments graph

Demand for residential properties is improving, amidst declining mortgage interest rates. During 2024, the total number of sales transactions for apartments in Luxembourg rose strongly by 49% to 4,845 units compared to a year earlier, following annual declines of 14.1% in 2023, 0.1% in 2022, 6.2% in 2021, and 3.3% in 2020, according to STATEC Luxembourg. Likewise, the transaction value also surged by 44.4% y-o-y to €3 billion (US$3.47 billion) last year, following a decline of 10.7% in the prior year.

Then in Q1 2025, there were a total of 1,135 sales transactions, up by 25.4% from the same period last year. Similarly, transaction value also increased by 43.5% y-o-y to €791 million (US$915.5 million) over the same period.

Foreigners can freely buy property in Luxembourg.

Despite recovering demand, residential construction activity continues to plummet. During 2024, the total number of dwellings with approved building permits fell by 8.6% y-o-y to 4,025 units, following annual declines of 6% in 2023 and 23.4% in 2022. In Q1 2025, the number of dwellings in residential buildings with approved permits plunged further by 37.8% to 774 units as compared to the same period last year.

The wider economy remains weak. During 2024, Luxembourg's economy grew by a meager 1% from a year earlier, following annual declines of 0.7% in 2023 and 1.1% in 2022. Last year's minimal growth was driven mainly by a positive contribution from net exports, while investment fell sharply due to declines in construction activity and equipment purchases.

The economy continues to struggle this year. In Q1 2025, the country registered an economic contraction of 0.4% as compared to the same period last year, following a year-on-year growth of 1.9% in Q4 2024 and a decline of 0.1% in Q3 2024. Quarterly, the economy has shrunk by 1% in Q1 2025.

The European Commission expects Luxembourg to register an overall economic growth of 1.7% this year, while the IMF projects a slightly lower growth of 1.6%.

Luxembourg is considered the richest country in the world, with a GDP per capita of US$138,634 in 2024, based on IMF figures.

Luxembourg GDP Per Capita graph

Demand Highlights:

Property transactions recovering

During 2024, the total number of sales transactions for apartments in Luxembourg rose strongly by 49% to 4,845 units compared to a year earlier, following annual declines of 14.1% in 2023, 0.1% in 2022, 6.2% in 2021, and 3.3% in 2020, according to STATEC Luxembourg. Despite the improvement, it remains the second lowest number of sales transactions recorded in recent years.

Likewise, the transaction value also surged by 44.4% y-o-y to €3 billion (US$3.47 billion) last year, following a decline of 10.7% in the prior year.

During 2024:

  • Existing apartments: the number of transactions rose strongly by 51.2% y-o-y to 4,055 units, in contrast to an annual contraction of 7.3% in 2023. Likewise, transaction value surged by 45% y-o-y to €2.42 billion (US$2.8 billion), in contrast to an annual fall of 3.5% in the prior year.
  • New apartments: the number of transactions increased by 38.4% y-o-y to 790 units, after falling by 26.4% in the preceding year. Similarly, the total value of sales also rose by a massive 41.6% to €581 million (US$672.4 million), in stark contrast to a decline of 22.7% in 2023.

Demand continues to increase this year. In Q1 2025, there were a total of 1,135 sales transactions, up by 25.4% from the same period last year. Yet it is still very low by historical standards. Similarly, transaction value also increased by 43.5% y-o-y to €791 million (US$915.5 million) over the same period.

Luxembourg Number of Apartment Sales Transactions graph

Homeownership rate continues to fall

Most people in Luxembourg live in owner-occupied properties. However, homeownership in the country has noticeably declined in recent years, with more people choosing to rent.

During 2024, the nationwide homeownership rate stood at 63.5%, sharply down from 67.6% in the previous year and 72.4% two years prior, according to Eurostat figures.

With high property prices, an increasing number of people are choosing to rent. Tenants' rights are well-protected. Most property is rented unfurnished, but for furnished properties, the rent cannot be more than double the previous rate. Rents can only be increased every three years.

Luxembourg Homeownership Rate graph

Supply Highlights:

Residential construction activity continues to plummet

During 2024, the total number of dwellings with approved building permits fell by 8.6% y-o-y to 4,025 units, following annual declines of 6% in 2023 and 23.4% in 2022, based on figures from STATEC Luxembourg.

By property type, in 2024:

  • One-dwelling residential buildings: 873, down by 17.2% from a year earlier
  • Two- and more dwelling residential buildings: 3,003, down by 5.9% from the previous year
  • Residences for communities: 126, down by 6% from a year earlier

Luxembourg Residential Building Permits graph

The weakness of the residential construction sector continues this year. In Q1 2025, the number of dwellings in residential buildings with approved permits plummeted by 37.8% to 774 units as compared to the same period last year.

By region:

  • In Luxembourg City, the number of dwelling permits plunged by 95.1% y-o-y to just 20 units in Q1 2025.
  • In the Cantons of the East (Echternach, Grevenmacher, and Remich), dwelling permits were up by 33.3% to 140 units in Q1 2025 from a year earlier.
  • In the Cantons of the Centre (Luxembourg-countryside, and Mersch), there were 238 dwelling permits issued in Q1 2025, a sharp increase of 43.4% from a year ago.
  • In the Cantons of the South (Esch-sur-Alzette and Capellen), dwelling permits fell sharply by 81% y-o-y to just 80 units in Q1 2025.
  • In the Cantons of the North and the West (Clervaux, Diekirch, Redange, Vianden, and Wiltz), dwelling permits more than doubled to 296 units over the same period.

Housing Pact 2.0 addressing affordable housing problems

In an effort to increase the housing stock in the country and make houses more affordable, the Ministry of Housing introduced the Housing Pact 2.0 in 2021. According to the Luxembourg Government's official website, the main goal of the new measure is to support municipalities in the development of affordable housing for the people.

To achieve this goal, Housing Pact 2.0 has three objectives:

  • Increasing the supply of affordable and sustainable housing;
  • Mobilizing existing land and residential potential; and,
  • Improving residential quality.

"Housing is the biggest challenge in Luxembourg for more and more people. However, with the impact of the health crisis and its consequences on public finances, the risk that municipalities and the state would give up on acquiring a significant number of affordable housing units was foreseeable. This would have compromised the purpose of our reform. That's why we have come up with an alternative," said Minister of the Interior Taina Bofferding.

Housing Pact 2.0 introduced a new Article 29bis in order to strengthen the provision of affordable housing.

"Article 29bis ensures the creation of a higher number of affordable dwellings in each special development plan "new district" (PAP NQ) and thus ensures that a good social mix is maintained in new residential areas," said the government.

For each new PAP NQ affected by Article 29bis, a certain percentage of the total area meant for housing is reserved for affordable housing, as shown in the table below:

Scope of the PAP NQ Share of the gross built area to be reserved for affordable housing
For land classified as a building zone before February 18, 2022
10-25 dwellings At least 10%
>25 dwellings At least 15%
For land classified as a building zone after February 18, 2022
5-9 dwellings At least 10%
10-25 dwellings At least 15%
>25 dwellings At least 20%
Source: Luxembourg Government

In July 2025, a draft law proposed simplifying procedures, giving municipalities more flexibility in funding, and adding grants of €2,500 (US$2,890) per unit for certain projects, with a budget of €560 million (US$647.3 million) for 2027-2036. These changes aim to accelerate delivery and strengthen municipal participation.

Since its launch, 98 municipalities have joined, with 93 already in the implementation phase. Between 2021 and 2024, affordable rental housing doubled to over 4,000 units, and social rental housing grew from around 650 to over 1,500 units, showing tangible progress toward national housing goals.

Rental Market:

Rental yields still low, rents rising strongly again

Rental yields in Luxembourg are low. Based on a recent Global Property Guide research, the gross rental yields on apartments - the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs - averaged 3.1% in Q2 2025. It is slightly up from 2.67% in Q2 2024 and 2.59% in Q2 2023, but still far lower than the average rental yield of 5% seven years ago.

Luxembourg's rent price index:

Data Source: ECB.

In Q2 2025:

  • In Belair, one of Luxembourg's most exclusive districts, sought-after for its classic, family-friendly style, the gross rental yields on apartments ranged from 2.18% to 2.93%.
  • In the city center, rental yields averaged 3.38% for studio and one-bedroom apartments; 3.5% for two-bedroom apartments; and 2.93% for three-bedroom apartments.

Residential rents are increasing rapidly again. In Q1 2025, the average apartment rent in Luxembourg rose by 12.2% from a year earlier, following year-on-year increases of 11.9% in Q4 2024, 12.1% in Q3, and 3.3% in Q2, and a slight decline of 1.1% in Q1, according to the Ministere du Logement. Quarter-on-quarter, apartment rents were up by 1.2% in Q1 2025.

Rent increases for houses are more muted. In Q1 2025, house rents were up slightly by 1.5% y-o-y, after registering modest to minimal annual growth of 2.6% in Q4 2024, 3.6% in Q3, 4.9% in Q2, and 1.5% in Q1. Quarterly, house rents fell slightly by 0.8% over the same period.

Luxembourg Rental Index graph

Nationwide, the average advertised rent for apartments was €1,768 (US$2,047) per month or around €37.54 (US$43.46) per square meter (sqm) in Q1 2025, based on figures from Ministere du Logement. For houses, the average rent was €3,600 (US$4,168) per month or €18.40 (US$21.30) per sqm over the same period.

In Luxembourg City, the country's capital, advertised rents are higher. The city's average advertised rent for apartments was at €1,902 (US$2,202) per month or €43.47 (US$50.33) per sqm in Q1 2025. Over the same period, the average rent for houses was at €4,425 (US$5,123) per month or €21.63 (US$25.04) per sqm.

Luxembourg City is the centre of rental market activity in the country, accounting for approximately 57.5% of the total 10,229 apartment rental ads in Q1 2025, and 21.5% of the 963 housing rental offers over the same period, according to Ministere du Logement.

Luxembourg Total Number of Offers for Rental Apartments graph

Mortgage Market:

Mortgage interest rates declining again

The European Central Bank (ECB), in its July 2025 meeting, kept its main refinancing operations rate unchanged at 2.15%, alongside the deposit facility at 2.00% and the marginal lending facility at 2.40%, maintaining a steady policy. Prior to this, the ECB slashed its key interest rates by eight consecutive times since June 2024 amidst easing inflation and persistent global trade uncertainties.

Luxembourg's mortgage loan interest rates:

Data Source: ECB.

Following the ECB's recent decisions, mortgage interest rates in Luxembourg have been falling again in recent months.

By initial rate fixation (IRF), in June 2025:

  • Floating rate and/or IRF of up to 1 year: 3.82%, down from 4.82% in the previous year and 4.58% two years ago, according to figures released by the Banque Central du Luxembourg (BCL).
  • IRF greater than 1 year and less than or equal to 5 years: 3.2%, down from 3.87% in the same period last year and 3.98% two years ago.
  • IRF greater than 5 years and less than or equal to 10 years: 3.55%, down from 3.83% in the same period last year and 4.11% two years earlier.
  • IRF for longer than 10 years: 3.43%, lower than the previous year's 3.57% and two years ago's 3.99%.

Luxembourg Interest Rates for Housing Loans graph

Likewise, the average interest rate for outstanding housing loans also declined to 2.63% in June 2025, down from 2.9% in the previous year and slightly lower than the 2.69% registered two years ago.

Most loans in Luxembourg have variable rates, so borrowers are very exposed to interest rate changes. The average loan-to-value ratio stands at more than 85%, with around 60% of all mortgages having loan maturities of 20 years and over.

Luxembourg Interest Rates for Outstanding Housing Loans graph

New housing loans increasing again

With stabilizing interest rates, new housing loans are increasing gradually again. In 2024, the value of new residential real estate loans rose by 11.3% y-o-y to €6.18 billion (US$7.14 billion), in sharp contrast to annual declines of 40.5% in 2023 and 17% in 2022, based on figures from the Banque Centrale du Luxembourg. Despite this, it remains the second lowest in the past decade.

Likewise, the total number of such loans was up by 17.7% to 14,994 in 2024, following a sharp drop of 30.5% in 2023.

Loans by purpose, in 2024:

  • Single-family homes: €2.84 billion (US$3.29 billion), up strongly by 17.2% from the prior year. The number of loans also increased by 6.7% to 5,784 last year.
  • Housing in apartment buildings: €2.24 billion (US$2.59 billion), up by a huge 42.6% from a year earlier. The number of such loans surged by 24.7% y-o-y to 6,037 in 2024.
  • Other residential or semi-residential buildings: €341 million (US$394.16 million), down by 23.8% from a year earlier. Similarly, the number of loans fell by 10.1% to 695 last year.
  • Improvements of existing buildings: €264 million (US$305.16 million), up by 20.7% from the previous year. The number of loans soared by 56.4% y-o-y to 2,256 last year.

New housing loans drawn and approved continue to increase this year. In Q1 2025, new residential real estate loans were up strongly by 41.1% y-o-y to €1.79 billion (US$2.06 billion). Likewise, the number of such loans also increased by 34.3% to 3,996 over the same period.

Luxembourg New Residential Real Estate Loans graph

Mortgage market improving

As a result of the recent rebound in new housing loans approved, the total amount of housing loans outstanding in Luxembourg rose by 3% y-o-y to €42.3 billion (US$48.89 billion) in June 2025, an improvement from a meager growth of 0.8% in 2024 and a contraction of 1.2% in 2023, according to figures released by the Banque Centrale du Luxembourg.

However, it remains far lower than the annual average growth of 7.6% from 2008 to 2022 and 14.2% from 2001 to 2007.

By initial duration, in June 2025:

  • The initial duration of fewer than 5 years: €858 million (US$992 million), sharply down by 20.5% from a year earlier
  • 5 to 10 years: €2.68 billion (US$3.09 billion), up by 5.5% from a year earlier
  • 10 to 15 years: €3.4 billion (US$3.93 billion), down slightly by 0.8% from the same period last year
  • 15 to 20 years: €5.49 billion (US$6.35 billion), higher by about 2.2% as compared to the same period last year
  • 20 to 25 years: €8.46 billion (US$9.78 billion), up by around 2.2% from the previous year
  • 25 to 30 years: €15.29 billion (US$17.67 billion), up by 5.1% from the same period last year
  • 30 years and more: €6.12 billion (US$7.07 billion), up by 4.8% compared to the same period last year

Luxembourg's mortgage debt as a percentage of GDP stood at approximately 48.2% in 2024, a decline from 50.8% in 2023, 54.3% in both 2022 and 2021, and 56.3% in 2020, based on figures from the Global Property Guide. It was the lowest level recorded since 2016 but still far higher than the 22.5% of GDP recorded in 1999.

Luxembourg Housing Loans graph

Socio-Economic Context:

Lackluster economic performance, weakening labour market

During 2024, Luxembourg's economy grew by a meager 1% from a year earlier, following annual declines of 0.7% in 2023 and 1.1% in 2022. Last year's minimal growth was driven mainly by a positive contribution from net exports, while investment fell sharply due to declines in construction activity and equipment purchases.

Economic activity in early-2025 remains weak. In Q1 2025, the country registered an economic contraction of 0.4% as compared to the same period last year, following a year-on-year growth of 1.9% in Q4 2024 and a decline of 0.1% in Q3 2024. Quarterly, the economy has shrunk by 1% in Q1 2025.

"Luxembourg's recent economic performance has been lackluster and a projected recovery faces headwinds," said the International Monetary Fund (IMF). "Anchored in strong economic fundamentals, the economy is expected to gradually recover from a protracted slowdown. Yet, the global situation is fluid, and there are risks of setbacks stemming from weaker external demand and higher financial market volatility, alongside domestic challenges in the real estate sector and the labor market."

With this, the IMF expects Luxembourg's economy to register another weak economic growth of 1.6% this year before improving to a 2.2% expansion in 2026. This is not significantly different with the European Commission's economic forecast of a 1.7% growth this year and another 2% next year.

"In 2025 and 2026, economic growth is expected to accelerate, as the fallout from trade restrictions initiated by the hike in US tariffs is foreseen to be more than compensated by the recovery of investment. The consumer confidence indicator points towards a mild recovery in consumption supported by an expansionary fiscal stance and falling interest rates, which underpin investment," said the European Commission.

"A wage indexation that occurred in May 2025 should further support private demand, while the recent increase in the number of transactions in both new and existing construction and in mortgage demand indicate a recovery in investment in dwellings which is set to further accelerate in 2026," added the European Commission.

Despite this, STATEC Luxembourg released a more conservative outlook, projecting a real GDP growth rate of just 1% for the whole year of 2025, as global trade tensions and geopolitical conflicts weigh on economic recovery.

From 1999 to 2007, Luxembourg enjoyed robust economic expansion, with an average annual GDP growth of 5.2%. After declining by 3.2% in 2009 due to the global financial crisis, the economy has been continuously growing modestly from 2010 to 2019. The country suffered an economic contraction of 0.5% in 2020 amidst the Covid-19 pandemic. Then in 2021, the economy bounced back, posting a strong real GDP growth of 6.9%, as pandemic-related restrictions were gradually eased.

Luxembourg GDP Growth and Inflation graph

In June 2025, annual inflation rose slightly to 2.19%, up from 2.01% in the previous month and the highest level in the past twelve months. Nationwide inflation had been averaging just 1% from 2013 to 2020, before rising to 5.6% in 2021 and further to a record 6.4% in 2022. Inflation slowed to 3.3% in 2023. It eased further to 1.6% last year.

The European Commission expects inflation the country to normalize this year. "Headline inflation is set to drop to 2.1% in 2025 owing to decelerating food and services prices while energy prices are expected to rebound slightly following the end of the energy price cap and the introduction of a new tariff on electricity grids," predicted the European Commission.

The country posted a budget surplus of €888.1 million (US$1.03 billion) in 2024, equivalent to approximately 1% of GDP last year. This followed a deficit of 1.3% of GDP in 2023 and 0.3% in 2022 and a surplus of 0.6% in 2021. Luxembourg is projected to record minimal shortfalls equivalent to around 0.4% of GDP this year and another 0.5% in 2026.

Despite this, public debt increased to around 26.3% of GDP last year, from 25% of GDP in 2023, 24.9% in 2022, 24.2% in 2021. The country's debt level is projected to hover around 26% of GDP in the medium term.

The labour market is weakening. In June 2025, the overall unemployment rate was 5.9%, slightly down from 6% in the previous month but higher than the 5.7% recorded a year earlier, according to figures from STATEC Luxembourg. Overall unemployment is projected to increase to 6% this year, from 5.7% in 2024, 5.2% in 2023 and 4.8% in 2022.

There were 17,886 unemployed people in the country in June 2025, up by 803 jobseekers or 4.7% from the same period last year.

Luxembourg Unemployment Percentage graph

Sources:

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