Tuesday, 22 September 2026
Luxembourg’s residential market is recovering from the sharp downturn of recent years, but the improvement is far from evenly distributed. Buyers have returned to existing homes in significant numbers, while sales of apartments still under development remain exceptionally weak. The divergence is becoming increasingly important because today’s lack of new-build sales could influence how many homes reach the market in the coming years.
During the first quarter of 2026, 968 existing apartments changed hands, an increase of 9.4% from a year earlier and close to the average of 1,032 transactions recorded during first quarters between 2017 and 2021. House sales also strengthened, rising 11.5% year on year to 650 transactions. New construction presents a very different picture: only 207 apartments under construction were sold during the quarter, down 18.2% from a year earlier and less than one-third of the roughly 650 normally sold during the first three months of the year before the downturn.
The weakness follows an already difficult end to 2025, when just 149 new-build apartments were sold during the fourth quarter. Apartments under construction sold for an observed average of €9,596 per sqm in Q1 2026, although differences in the size and characteristics of properties being transacted affect direct comparisons of average prices. Financing costs, construction expenses and uncertainty over future values continue to influence purchasing decisions, while problems experienced by some developers have made buyers more conscious of the risks associated with purchasing before completion.
For developers, weak sales can have consequences well beyond quarterly transaction figures. Residential projects commonly need to secure a certain proportion of buyers before banks will release development financing. When insufficient households commit during the early stages, projects can struggle to reach the point at which construction can proceed. Persistently weak presales can therefore eventually translate into fewer housing starts and a thinner supply pipeline.
Luxembourg’s government has responded by becoming a more active participant in the market. An additional €300 million was allocated in 2026 for purchases within private residential developments, building on an earlier €480 million programme. By July, the state had acquired or reserved around 830 homes through the initiative. The revised approach also allows public authorities to acquire part of a development, helping projects reach the presale levels required for financing without necessarily purchasing an entire scheme.
The intervention comes while pressure remains elsewhere in the housing system. Advertised apartment rents increased 4.4% year on year in the first quarter of 2026, while construction activity remains considerably below levels recorded before the property downturn despite early signs of improvement in residential investment. Public housing organisations are increasing their own development activity, but the privately financed new-build market continues to face a much more difficult recovery than the market for existing homes.
Luxembourg’s housing rebound is therefore more complicated than improving transaction figures initially suggest. Existing homes are selling again and the broader market has stabilised, but the mechanism responsible for producing a substantial part of tomorrow’s private housing remains under pressure. If developers continue to struggle to secure enough buyers to start projects without substantial public support, today’s weak new-build market could eventually contribute to another shortage of completed homes in a country where housing supply is already one of its most persistent economic challenges.
Source: CIJ.World Research & Analysis Team
