Prices for apartments rise in Luxembourg: market segmentation and trends (Adapted from an article published by L'OBSERVATOIRE DE L'HABITAT, September 2012)

According to data provided by the Observatoire de l'Habitat, the number of apartments sold did significantly increase in the second quarter of 2012 compared to the previous quarter (19.9%). The data reveal that such transactions have been much more intensive than one year earlier (14.1%).

According to the same survey, the average price per m² increased (+2.27% for existing apartments and 5.31% for those under construction) compared to the previous quarter. The price per m² is nevertheless even higher year over year, that is to say, compared to the second quarter of 2011 (+4.34% for existing apartments and 6.69% for apartments under construction).

If we consider exclusively the apartments already existing, this increase is particularly strong for smaller units (less than 60 m²) which represent approximately 24% of the sales recorded during the second quarter of 2012. For the apartments still under construction, average prices increased in all segments, except for apartments whose surface stands at less than 50 m². The increase was particularly high (16%) for apartments under construction with a surface comprised between 60 and 70 m². This price increase is also accompanied by a marked reduction in the average surface of the apartments being sold.

Geographically, the average selling price per m² increased significantly (old market, i.e. already existing apartments) compared to the previous quarter in the Centre-North region, Centre-South (which also includes Luxembourg-City) and East region. These three regions account for 55% of the transactions recorded during the second quarter of 2012. On the other hand, the average selling price per m² decreased - always from the previous quarter - in the South (-2.01%).

The Centre-South and South regions account for 81% of the transactions recorded for apartments still under construction; in the South prices fell slightly (-1.04%), whereas they increased in the Centre-South region (5.01%).

The Observatoire de l’Habitat has made available a data set that illustrates the average selling price per municipality. For existing apartments, the lowest prices were recorded at Park Hosingen (2’809 €) and Wiltz (2’933 €), while the record belongs to the capital of the Grand Duchy with 4’927 € per m².

For apartments under construction, Luxembourg City is not the most expensive place (5’808 €), as even higher prices were recorded in Strassen (6’002) and Bertrange (6’120).

Under the spotlight: the price advertised for sale

The same source noted that advertised sale prices increased slightly in the second quarter 2012 compared to the first quarter of this year: +1.13% and 0.51% for houses and apartments respectively. Year over year prices advertised for sale declined slightly for houses (-0.64%) while they increased quite significantly for apartments (+2.17%).

The average advertised price for sale amounted to approximately 592’600 € for a house, that is to say 3’391 € per m². Prices rose slightly on the segment of houses with 3 bedrooms (0.67%), whereas they decreased slightly for houses with 4 bedrooms (-1.06%). These two segments combined together account for about 78% of all offers available on the market.

For an apartment, the average price in the second quarter of 2012 is approximately 370’400 €, which corresponds to 4’174 € per m². The prices advertised for sale have increased dramatically for small units, especially for studios (+17.20% year over year).

Luxembourg City is a very specific case and always interesting to analyze. The retail market is dominated by apartments which represent 83% of the ads published in the second quarter of 2012. Prices for sale are among the highest in the country and stand at approximately 795’900 € for a house (or € 4’561 per m²) and 475’400 € (5’500 per m²) for an apartment.

The prices advertised for sale have increased significantly over the past year: +5.85% per m² for houses and 6.01% for apartments.

The price increase is particularly strong in the Centre-South region (which includes the capital) while prices advertised for houses have decreased significantly in the South (-3.56%) that accounts for about 35% of all offers in the country.

Under the spotlight II: the price advertised for rent

According to the Observatoire de l’Habitat, the number of rental ads increased sharply during the second quarter of 2012 and is significantly higher than the figure recorded a year ago (+25.68% and 17.74% for houses and apartments respectively).

After a decline in the first quarter of 2012, rents have resumed their upward trend (2.60% for houses and 0.73% for apartments). Over one year, rents have nevertheless reduced for houses (-1.32%), while they increased slightly for apartments (0.37%).

The average rent announced for a house is 2’261 € per month, or 11.87 € per m², while the amount requested for an apartment stood at 1’147 € per month in the second quarter of 2012.

The number of rental ads rose sharply in almost all segments, with the largest increases observed for small houses with 2 or 3 bedrooms and studios that account all alone for 18% of the apartments available for rent.

At the same time the rental market does not seem too dynamic as only 47% and 42% of the ads were published during the second quarter of 2012, that is to say that the percentage of new ads has decreased over the year.

Luxembourg City is the main focus of the rental market: 40% of rental apartment ads available in the country in the second quarter 2012 are concentrated in the capital and this percentage stands at 15% for rental houses. Advertised rents for properties available in the capital remain among the most expensive in the country, the average price amounted to 1’292 € for an apartment and 2’986€ for a house. It should also be noted that the average rents per m² increased significantly year over year in Luxembourg City.

By cons, the advertised amounts to rent houses fell sharply – in comparison with the second quarter of 2011 - in the Centre-North, Centre-South and South regions.