Luxembourg | Publication | May 2025
The Luxembourg real estate market in 2024 was characterised by a gradual recovery from the downturn experienced in the previous years. After a period of declining prices and reduced transaction volumes, the market began to show signs of stabilisation with some limited growth in certain sub-sectors.
Despite this overall gradual recovery, the price of residential properties, including houses and apartments, experienced a notable decline. According to the Luxembourg Times, the cost of homes of almost all types fell throughout the year, although prices stabilised in the final quarter.
The National Institute of Statistics and Economic Studies in Luxembourg (STATEC) report from September 2024 highlighted that the price of existing houses decreased by 9.9% compared to the second quarter of 2023. The index for apartments being built off-plan (VEFA) saw a smaller year-on-year decline of 4.3%. This trend was attributed to high borrowing costs and the overall economic environment (see also the section on economic factors below).
The number of transactions in the real estate market as a whole showed a mixed trend. The Luxembourg Times reported that property sales saw a significant jump in the third quarter of 2024, with a total of 1,139 residential properties sold, marking the highest quarterly number since 2022. However, according to JLL, the take-up of office space slumped to its lowest level since the middle of the eurozone crisis in 2011.
The STATEC report from September 2024 indicated that the number of transactions for existing houses increased by 44% compared to the previous year. In contrast, the market for off-plan apartments (VEFA) remained sluggish, with only 154 transactions recorded in the second quarter of 2024. This represents a significant decline from the pre-crisis average.
Due to weak transaction volumes and higher interest rates in 2024, it should also be noted that some real estate developers and construction companies continue to face financial difficulties (and there have been some bankruptcies). This may impact the VEFA market in the future, in terms of potential consolidation of the market on the one hand and customer confidence on the other hand.
The economic environment in Luxembourg played a crucial role in shaping real estate market trends in 2024. The Luxembourg economy experienced modest GDP growth of 0.41% year-on-year, driven by private spending and a trade surplus. However, private consumption slowed in the second half of the year due to declining consumer confidence and weaker wage growth.
Inflation remained below the eurozone average, with the consumer price index at 2.04% for 2024. The labour market faced challenges, with the unemployment rate increasing to 5.73%, up from 5.22% in the previous year. All these economic factors had a notable impact on the strength of the Luxembourg real estate market across all sub-sectors compared to the market high point in 2021.
As we move through 2025, the Luxembourg real estate market has started to recover, and several key trends are anticipated to shape its dynamics.
The Luxembourg Times reported that house prices in Luxembourg rose modestly in Q1 of 2025 for the first time in two years, with a 1.4% annual increase in overall housing prices registered at the end of 2024. This trend is expected to continue for the rest of 2025, with prices stabilising and potentially continuing to increase slowly. Pierre Clément, CEO of Nexvia, also believes that the progressive rise of real estate prices has kicked off and continues its upward trend, especially in Luxembourg City and the neighbouring municipalities.
The STATEC report from March 2025 indicated that the prices of residential properties increased by 1.4% in the fourth quarter of 2024 compared to the same period in the previous year. The prices of existing houses rose by 3.0%, while apartments increased by 1.8%. However, the prices of flats built off-plan continued to decline, with a 2.4% decrease recorded in the fourth quarter of 2024.
The number of real estate transactions is expected to increase in 2025, driven by improved economic conditions and increased consumer confidence. The March 2025 STATEC report highlighted a significant increase in the number of transactions for existing houses and apartments in the fourth quarter of 2024. The number of transactions for existing houses rose by 77.2%, while transactions for existing apartments increased by 108.2% compared to the same time last year.
The market for off-plan apartments also showed signs of recovery, with a 272.6% increase compared to the number of transactions recorded in the fourth quarter of 2024, albeit that number remained below the pre-crisis average.
The Luxembourg economy is expected to experience stronger growth in 2025, with GDP growth projected to increase to 1.46%. This is anticipated to be driven by improved consumer spending and business investment, supported by expansionary fiscal policies and wage indexations.
Inflation is projected to ease further to 1.60% in 2025, aligning more closely with central bank targets. The labour market is expected to improve, with the unemployment rate projected to decline to 5.53%. These better economic factors, together with the trends outlined below, are expected to revitalise the real estate market.
The Luxembourg government has played a significant role in supporting the real estate market through various housing aid measures. In April 2025, the Luxembourg Times reported that temporary housing aid measures had been extended until June 2025. These measures also included an increased tax credit of EUR40,000 for purchasing a primary residence and are expected to continue supporting the market during 2025, providing incentives for homebuyers and stabilising the housing market.
At the same time, through the Special Fund for Affordable Housing (Fonds Spécial), the Luxembourg State continues to support the Luxembourg housing market and allocates substantial resources to invest in the creation of affordable housing. This measure increases the public affordable housing stock and supports developers who lack liquidity and face difficulties selling their projects.
The Special Fund for Affordable Housing is endowed with an additional multi-annual financial envelope (2024-2027) of EUR480,000,000, which it intends to use to significantly increase the creation of affordable public housing, support access to it, and revive the construction companies’ activity.
In addition, the 2024 budget provided (through the Special Fund for Affordable Housing) approximately EUR1.45 billion to be invested in creating affordable housing (for rental and sale) from 2024 to 2027, commensurate with an annual average of more than EUR360,000,000 and doubling the Special Fund’s expenditures from 2023, which amounted to EUR184,000,000.
Several major construction projects and urban development initiatives have been undertaken in Luxembourg, contributing to the growth and transformation of the real estate market. The Luxembourg Times highlighted several key projects, including the redevelopment of the Hollerich district, the construction of the Stairs building in the Cloche d’Or district, and the development of PwC Luxembourg’s future headquarters, also in the Cloche d’Or district.
These projects are expected to enhance the infrastructure and attractiveness of Luxembourg’s real estate market, providing new opportunities for investors and homebuyers.
Other key infrastructure projects will also be developed in the south of the country, such as the construction of the Südspidol project.
The office market in Luxembourg has faced challenges in recent years, with declining take-up and rising vacancy rates. The JLL report from Q4 2024 indicated that office space take-up reached its lowest level since 2011, with a total of 133,321 square meters taken up in 2024, down 24% year-on-year. The vacancy rate remained stable at 4.2%, but a moderate increase in vacancy is anticipated in 2025 due to speculative completions. Banking & Finance companies and the State of Luxembourg have been the most active occupiers during the past 12 months.
Despite these challenges, the office market is expected to rebound in 2025, with rising rents and increased occupier activity. The CBRE report from Q4 2024 highlighted that prime rents remained well-supported, with no significant changes noted in Q4. The overall prime rent for Luxembourg City is held at EUR54 per square meter/month.
A rebound in activity is anticipated for 2025, primarily because the State of Luxembourg and European institutions are taking on large surface areas. Given this expected rebound, the State of Luxembourg and European institutions, rather than private companies, are likely to be the key players in the office leasing market for 2025. This shift may not reflect positively on the Luxembourg economy.
The retail market in Luxembourg has shown resilience despite economic uncertainties. The Cushman & Wakefield report from H2 2024 indicated that retail sales maintained a stable yet gradual increase throughout the year. Prime high street rents remained stable at EUR145 per square meter/month, while shopping centres and out-of-town retail saw slight increases in prime rents.
The European Central Bank’s interest rate cuts in 2024 and the potential for further cuts in 2025 are expected to benefit the retail market, providing favourable borrowing conditions and supporting investor confidence.
One of the key challenges facing the Luxembourg real estate market is housing affordability. The high cost of housing has made it difficult for many residents to get on the housing ladder, leading to increased demand for affordable housing solutions. The STATEC report from March 2025 highlighted that the prices of residential properties in Luxembourg remain among the highest in Europe, with the average cost of a 100-square-meter home equivalent to 246 times the average salary after taxes.
As mentioned above, the government has implemented various measures to increase the supply of affordable housing, including the construction of new housing units and the provision of housing aid. These efforts are expected to continue in 2025, providing opportunities for developers and investors to contribute to a more affordable housing market.
Environmental sustainability and decarbonisation have become increasingly important considerations in the real estate market. The Emerging Trends in Real Estate Europe 2025 report highlighted that more than two-thirds of respondents are concerned about meeting environmental and decarbonisation requirements by 2025. It also indicated that property owners without a net-zero pathway for their assets may struggle to obtain financing (or may only be able to obtain higher interest rates).
In response to these challenges, developers and investors are increasingly focusing on sustainable and energy-efficient buildings. Adopting green building practices and integrating renewable energy sources are expected to become more prevalent in the Luxembourg real estate market in 2025.
Geopolitical and economic uncertainties continue to pose challenges for the real estate market. The Emerging Trends in Real Estate Europe 2025 report highlighted concerns about political instability, increased regulation, and the availability of finance – all key factors impacting investor confidence and market stability.
However, the report also indicated a sense of cautious optimism among real estate leaders, with expectations of greater business confidence and profits for 2025. The anticipated recovery in economic growth and the easing of monetary policies are expected to support the real estate market in the coming year. High volatility in stock prices during April 2025 may also strengthen the real estate market, which could be seen as a safe haven.
The Luxembourg real estate market has experienced significant fluctuations and developments over the past two years. In 2024, the market showed signs of recovery, with stabilising prices and increased transaction volumes. As we move through 2025, the market is expected to continue its recovery, driven by improved economic conditions, government support measures, and ongoing construction projects.
Despite challenges like housing affordability, environmental sustainability, and geopolitical uncertainties, the Luxembourg real estate market offers opportunities for investors, developers, and homebuyers. By prioritising sustainable and affordable housing solutions, taking advantage of government support, and adapting to changing market dynamics, stakeholders can effectively navigate the evolving real estate landscape and contribute to the growth and development of Luxembourg’s housing market.
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