Should you still invest in residential real estate in Luxembourg in 2025?

Written by Tanaïs Lejeune, Residential Agency Consultant & Lucas Guichard, Research Manager

The Luxembourg real estate market has always attracted strong interest, both from residents and investors. In 2025, amidst an evolving economic environment and changing market dynamics, the question of whether to purchase a residential property becomes particularly relevant. This article provides an analysis of the real estate context in Luxembourg, based on recent data about advertised prices and rents (sources : atHome and immotop.lu) and expert projections.

Stabilized prices in 2025 after several years of growth

In recent years, the Luxembourg real estate market has experienced sustained growth, with prices reaching record highs, particularly in Luxembourg City and its surrounding areas. Between 2018 and 2022, housing prices increased by an average of 12 to 15% per year, driven by consistent demand and limited supply. However, since 2023, the market’s momentum has slightly slowed due to rising interest rates and economic uncertainties. By 2024, the market reached a stabilization phase, with notable variations depending on regions and property types.

Old houses recorded a price decrease of 2.6% compared to late 2023, while older apartments saw a slight drop of 0.5%. New apartments showed near stability, with a marginal decline of 0.3% over the year, although sales volumes remained limited.

These shifts occurred in a context of continued favorable tax measures for real estate transactions and decreasing interest rates initiated by the ECB and the Federal Reserve, which began to stimulate demand and sent a positive signal for 2025.

Regional price variations

In the northern region of the country, prices for older apartments rose by 4.5%, whereas in the south, they experienced a moderate decline of 3.7%. For older houses, prices fell by 6.4% in the west, while the central region saw a slight increase of 1.2%. Nationwide, the average price across all property categories stood at €7,785/m², reflecting signs of market stabilization.

The rental market showed signs of slowing down in late 2024 after several quarters of growth. House rents fell by 3.7% compared to the previous quarter, settling at €3,208/month, while apartment rents decreased by 1.9%, reaching €1,824/month, following a peak of €1,860/month in the previous quarter. However, some regions displayed divergent trends: in the center, apartment rents increased by 4.4% over the past year, while the west saw a 4.2% decline during the same period.

Luxembourg City remains highly attractive due to its economic dynamism. Emerging areas such as Belval or northern Luxembourg also stand out with their strong population growth. These regions benefit from rapid development supported by modern infrastructure and a high quality of life, offering interesting medium- and long-term appreciation potential.

A recovery driven by lower interest rates 

The evolution of mortgage rates has had a major impact on the market in recent years. After an extended period of historically low rates, the European Central Bank (ECB) implemented several increases in its key rates to control inflation. By 2024, average mortgage rates reached 4%, which reduced household purchasing power.

Prospects for 2025 are more promising. According to the latest data published by the Luxembourg Central Bank (BCL) on January 6, 2025, interest rates for real estate loans have decreased in most categories compared to the previous month. For example, fixed-rate loans over ten to fifteen years dropped by 0.16 percentage points, currently averaging 3.74%. If this trend continues, it could create a more favorable environment for buyers and investors seeking new opportunities.

So, is it the right time to buy or invest ? 

Buying a property in 2025 could represent a great opportunity for residents, especially in a context of price stabilization and more favorable financing conditions. However, it is essential to carefully choose the location, considering regional differences, and to prepare financing plans meticulously to maximize the benefits of this favorable period.

For investors, the gross rental yield in Luxembourg ranges from 3% to 4%, with significant variations depending on the area. While achieving these returns has become more challenging due to high interest rates, the market remains attractive and continues to offer numerous opportunities.

The rental market also shows positive signs. The average rent per m² in Luxembourg reached €29/m² in Q4 2024, marking a 7.8% increase compared to the previous year (€26.9/m² in Q4 2023). Compared to 2022, this increase is even more pronounced: rents have risen by 16.9% since Q4 2022, climbing from €24.8/m² to €29/m². This reflects sustained rental demand and continued profitability in certain areas.

Conclusion : A stabilization phase conducive to projects in 2025

In summary, the Luxembourg real estate market seems to be entering a stabilization phase with variations across segments.

Prices for older houses and apartments are expected to stabilize, with a slight increase possible throughout the year. The market for new apartments, which is gradually regaining momentum, is unlikely to see significant price changes in the short term. While economic uncertainties and rising interest rates have slowed momentum, ongoing fiscal measures and financial adjustments offer potential for recovery.

The market remains attractive, but it is crucial for investors and buyers to seek guidance to understand regional trends and specific opportunities to optimize their real estate projects.

The market for furnished properties and short-term rentals continues to attract interest, though it is subject to strict regulations for individuals wishing to enter this space. A progressive professionalization and rationalization of this activity is expected in the coming months.

With our expertise and know-how, the INOWAI teams are available to assist you every step of the way and provide tailored solutions to meet your needs!