The publication in June, just before the summer break, of the Grand Duchy’s property market statistics had dampened spirits. For the first quarter of 2023, compared with the first quarter of 2022, the figures showed a collapse in the number of transactions and a historic fall in prices after more than a decade of continuous growth. The cause, in particular: a sharp rise in interest rates. Now that the summer is over, there are good reasons to think the second half of the year will be brighter. Some rates are in fact already falling: a promising sign!
Positive fundamentals
Luxembourg remains one of the star performers of the European economy. While the European Commission’s Directorate-General for Economic and Financial Affairs has revised its GDP growth forecasts upwards (1% in 2023 and 1.7% in 2024), the figures for the Grand Duchy remain above those of its neighbours (1.6 for 2023 and 2.4 for 2024). Structurally, then, the context invites optimism, despite the war in Ukraine and rising energy prices. Enough to reassure investors and continue to buoy the markets, the property market above all.
Rates that are starting to fall
Once the fundamentals are sound, there is no reason for interest rates to keep climbing. Including on mortgages. It serves neither prospective buyers nor the banks, which risk seeing investors tempted by other sectors of the economy (industries linked to the energy transition, for instance) or even by other regions.
And what had been anticipated was confirmed on 18 August: the Central Bank of Luxembourg revealed that the average fixed mortgage rate fell in June for the 3rd month running. It was estimated at 3.79%: well below the peak of 3.93% recorded in April. A few tenths of a point translate into hundreds or thousands of euros more or less in interest! For borrowers who have already opted for a variable rate, on the other hand, the rate stood at 4.42% in June, against 4.38% the previous month.
Competition across the border
Another reason for optimism: the neighbouring regions are weathering the downturn better. “Belgian notaries found that sales fell in all three regions of the country (Flanders, Brussels and Wallonia) in the first half of the year, but rose from the first to the second quarter”, the website Virgule noted recently. Prices are moreover rising in the Belgian province of Luxembourg (+43.8% for houses and +30.5% for flats), again according to the same source. On the French side, in Lorraine, prices are holding up and the fall in transactions is half as marked as in the Grand Duchy.
Mechanically, Luxembourg sellers therefore have every interest in falling into line with the competition across the border. Prospective buyers stand to gain.
The state steps in
One final argument points to a recovery. Luxembourg minister Henri Cox told RTL that the authorities intended to continue their policy of supporting social (affordable) housing. That means the state taking over private projects halted by the crisis. A budget of 110 million has been released. Here too, through a domino effect, prospective buyers should benefit, even those looking to buy a “non-affordable” home. In effect, the state is seeking to lead by example…
All that remains is to be properly supported along the way… Put your trust in the experts at LuxKredit to find, with you and/or for you, the right opportunities and financing to buy the right home at the best price and with a tailored credit solution.
