Luxembourg is experiencing a significant shift in its housing market, with a decline in property prices and a surge in rental rates. According to data from atHome.lu, buying a house or apartment in Luxembourg was much cheaper in Q1 2023 compared to the same period last year. However, rental rates have skyrocketed, leading to a challenging situation for potential renters.
Property Prices Drop Nationwide
The demand for housing in Luxembourg has slowed down, leading to a decrease in property prices. In Q1 2023, the prices of homes for sale fell by 5.1% nationwide compared to the previous year. In the existing housing market, prices decreased by 3.6%, while in the new housing market, prices fell by 7.4%.
The drop in prices is evident across all regions of the country. For instance, in the center, which includes the capital, house prices decreased by 9%, while apartment prices fell by 4.9%. Despite this, the average cost of buying a house or apartment is still high, with a cost of around €1.04 million in the center and €1 million in the west.
One exception to this downward trend is the northern region, where house prices have increased by 10.2%. As a result, renting a house in the north is more expensive than in the south, with an average cost of €767,211 in the north and €750,006 in the south. In the east, the average cost of purchasing a home is €908,802.
Rental Rates Soar Nationwide
While property prices are dropping, rental rates are on the rise in Luxembourg. The decline in demand for purchasing homes has led to an increase in demand for rental properties. Consequently, rental rates have increased by 8.7% nationwide, with apartments seeing an increase of 8.3% and houses an increase of 11.8%.
The rental rate surge is evident across most regions of the country, with exceptions in the east and south. The most significant increases in rental rates have occurred in the central and northern regions, with rental rates for houses increasing by 15.1% and 19.7%, respectively. Despite the surge, renting a house in the north is still cheaper than in other areas, with an average monthly rent of €1,384. In comparison, the south has rental rates of €1,564, the east €1,729, the west €2,005, and the center €2,118 per month on average.
The Impact of the Market Shift
The decline in property prices and the increase in rental rates have led to a significant market shift in Luxembourg. The decrease in property prices may make homeownership more attainable for some, but the high cost of purchasing a home remains a barrier for many. At the same time, the surge in rental rates makes it difficult for potential renters to find affordable housing.
Mortgage Loan: Banks Cannot Impose Penalties for Late Interest
If you are taking out a mortgage loan, you will undoubtedly have to pay interest. This is the amount you have to pay in addition to the amount you borrowed. In other words, it is the way in which the organization that lends you the money is compensated for the risk it takes. That’s why the interest rates for mortgage loans can differ based on the borrower’s profile and the amount requested: the more money you want to borrow, the longer the repayment period, and the riskier your profile, the more the bank will want to compensate for its risk with a higher interest rate.
Note that you pay most of the mortgage interest in the first half of the loan period. In the following case, the Court of Cassation prohibits banks from imposing penalties for late payment of interest.
A borrower thought he could buy new apartments to rent out. However, he was unable to honor his loan repayments. He finds himself having to repay additional interest.
Penalties if They Are Specified in the Contract
The Court of Cassation recognizes that the capitalization of interest in arrears leads to an increase in the amounts to be repaid. However, it recalls that the Consumer Code strictly lists the indemnities or compensations that the professional lender may demand in the event of late payments. “No indemnity or cost other than those listed can be charged to the borrower when, following failures in his repayments, the bank demands early repayment,” states the Consumer Code. In this case, no penalty can be claimed if it has not been clearly written in the contract before the client fails to make payment.
Late payment of mortgage loan interest can be a burden, but if you are aware of your rights as a borrower, you can avoid additional financial penalties. It is essential to carefully read the loan contract before signing and to consult with legal experts if necessary. By doing so, you can ensure that you are fully aware of your obligations and the penalties that may be incurred in case of default. Remember, it is your money and your future, so it is essential to take responsibility and make informed decisions when taking out a mortgage loan.
The housing market in Luxembourg is experiencing a significant shift, with a decrease in property prices and an increase in rental rates. While buying a home may be more attainable for some, the high cost of purchasing a home remains a barrier for many. On the other hand, the surge in rental rates makes it difficult for potential renters to find affordable housing. It is unclear how long this market shift will last, but it is essential to monitor the market trends to make informed decisions about buying or renting a home in Luxembourg.
