RTL Today – Real estate: Investments increasingly shifting to eastern and northern Luxembourg

As property prices in and around the capital continue to skyrocket, investors are increasingly shifting their focus to other regions of the Grand Duchy, particularly the east and north.

Like any other buyer, investors have been faced with rising property prices for years. But since 2021 it is no longer just prices that have been holding back investments in the Grand Duchy. In fact, the new home market has suffered with the new credit restrictions that went into effect on January 1, 2021, and a less favorable tax system.

But all hope is not lost. If the canton of Luxembourg was once the promised land of investors, they seem to have found happiness elsewhere. Indeed, the data presented Tuesday by Housing Minister Henri Kox shows a shift in investment to the east and north of the country in 2020.

A particular trend can be seen in the east of the country

And for good reason: in 2019, only 28 new apartments were sold for investment in the east of Luxembourg. The following year it tripled (94). While the increase in the north was not quite as dramatic, the number of sales rose from 105 to 142 between 2019 and 2020. A dynamic that appears to be “broken” in 2021, but not only in the north or east of the Grand Duchy.

Despite incomplete figures, both industry experts and the ministry agree that the transaction volume for new apartments in 2021 has decreased compared to the two previous years. That decline was recently quantified at 12% over a year by the Housing Observatory, although data for the fourth quarter has yet to be analyzed.

Housing Minister Henri Kox attributes this to “a decline in demand from rental investors”, but it is clear that the east and north of the country continue to be popular areas for investors. Most recently, they accounted for 26.2% of asset sales (first three quarters of 2021).

That is less than last year (28.3%), but still corresponds to 89 of the 340 sales that were recorded at the end of the third quarter of 2021. For their part, the cantons of Luxembourg and Esch an der Alzette remain the most popular regions for investors with a market share of 62.9% (214 sales) from the Ministry of Housing.

The sharp rise in prices and a decline in gross rental income in Luxembourg City would explain a shift in sales

Despite these figures, Henri Kox points out that the canton of Luxembourg suffered the most in 2021: while the canton of Luxembourg accounted for an average of 45.7% of sales of apartments under construction by investors, this proportion fell to 34.8 in the first year % First nine months of 2021.

The “sharp rise in prices” and “a subsequent decline in gross rental income” would explain a shift in sales to areas “with higher gross rental income”, according to the minister. Among these areas, Kox mentioned “a particular trend in the east of the country”.

It confirms a “significant” increase in the number of apartments under construction “in the second half of 2020 and early 2021” in the cantons of Echternach, Grevenmacher and Remich.

A trend that could be confirmed in the coming months if the price level in the east and north of the country remains unchanged.