Real estate market trends

When asked “Are real estate prices too high?”, 89% of Luxembourg residents surveyed said prices are high (compared to the European average of 60%) and 78% believe prices will continue to rise in the next 12 months.

Interest rate context

As for choosing a rate formula, many respondents (almost one-third) don't know which to choose; although over one-third (35%) prefer fixed rates in 2016, which remains in the same trend as in 2013 (38%)! If we take the level of interest rates in 2013 and 2016 into account, it is interesting to note that finally, consumers’ choice in terms of rates seem not to be impacted.

Even though the fixed rate recently reached a record low, falling below even the variable rate, 50% of respondents believe that rates will go back up in the next 3 years.

Difficulties purchasing property

70% of respondents say they had to change their spending behaviours in order to be able to buy property. Buying property can cause people to make sacrifices in some cases: 27% drastically reduce their spending, 45% set money aside to make a down payment and 20% forgo holidays, compared with European averages of 41%, 33% and 21% respectively.

Feelings about the real estate market

78% of Luxembourg residents are happy with their housing situation, whereas the European average is 69%. However, homeowners are the happiest (85% versus 64% for tenants). Only 8% are unsatisfied with their housing situation, which matches the European average.

Macroeconomic view of the residential real estate market

ING Senior Economist Philippe Ledent presented ING's macroeconomic perspective. Naturally, supply and demand can explain the changing real estate prices. However, experience shows that real estate prices are also determined by the ability to repay a loan, which depends on income, interest rates, tax regulations, ability to save, etc.