High demand for housing in Luxembourg

Tim Harrup

Within the context of the Luxembourg government having organized, earlier this month, its first conference on the housing crisis, it is pertinent to look at some of the findings of real estate advisor JLL in its analysis of the Luxembourg residential market. The authorities, first of all, brought together many of the players in the sector – communes, developers (particularly of affordable housing), associations and advisors.

JLL starts by saying that demand remains high on the housing market (acquisition and rental). Looking forward, based upon official statistics suggesting a population of 700,000 in the second half of the decade and 2.35 persons per household (as in 2021), JLL calculates that a fraction short of 300,000 dwellings will be needed overall, which equates to almost 24,000 additional dwellings in 5 to 10 years’ time.

The coronavirus crisis, JLL goes on, will undeniably have an impact on housing preferences. Not only has the pandemic caused delays in completions, many potential buyers have added criteria to their search. A terrace or a garden are now significantly more popular than before. In general, demand for peripheral locations is rising, driven by lower prices, larger surfaces, the availability of new supply and facilitated by new ways of working.

Co-living and eco-concepts

Alongside the geographical diversification, another trend is the diversification of housing types. Co-living concepts in particular are gaining speed in the Grand Duchy. More elaborated than just sharing accommodation to reduce costs, these new housing concepts offer furnished and serviced apartments and create a sense of community through the organisation of small events, thus attracting both expats and millenials. Various specialists such as Colive, Cohabs and Colonies are actively searching for opportunities in the market. Other housing concepts focus on some form of co-living in combination with eco-construction. These projects typically integrate in the (green) environment, use sustainable building techniques whilst enhancing the occupants’ wellbeing by offering common leisure areas or a common garden.

Looking back at what happened in 2021 on the market, JLL finds that nationwide, 4,756 transactions were recorded, 339 transactions or 7% less than in 2020. This confirms otheir market experience of lengthening negotiation processes. The decline is entirely due to the reduction in sales of new apartments (-35%) as transactions involving existing apartments showed a 12% increase compared to 2020.

Affordable housing

Moving back to the governmental involvement in all this, JLL recalls that the Pacte Logement 2.0 was created by the government to support municipalities in developing affordable housing. The new housing pact (Housing Pact 2.0) has been applicable since 1st January 2022 and has 3 main objectives: to increase the supply of affordable and sustainable housing at a municipal level; to mobilise existing land and residential potential and to improve residential quality. The new law contains an obligation to allocate between 10% and 20% of the constructible land per district planning project to affordable housing, thus ensuring a good social mix. Nevertheless, concludes JLL, even if the pace of development increased in the past few years demand still outweighs supply. Initiatives are being taken by federal and municipal authorities to increase the offer of constructible land, but it will take time to design and build new housing units.