The Corona pandemic in its current status is directly influencing the Luxembourgish residential real estate market. After the pandemic started more than one year ago the Luxembourgish hoped month by month that the number of infections would go down - either reduced by a hard lockdown, more tests, or vaccinations. All kinds of strategies have not been successful until today and many people start losing faith. The market is now confronted with the so-called “third wave”. This insecurity and the unforeseeable situation is automatically creating a wish for safety.
Furthermore, Luxembourg is one of the most international places in Europe. People from all over the world and especially from the neighboring countries France, Belgium, and Germany come to Luxembourg to work and live - if it is long term or short term. Because of the pandemic, many companies decided to close their offices and made their employees work from home. This short-term strategy is now becoming a big trend. Companies discuss new work models, setting up new rules, and realizing that a flexible working environment helps to reduce the cost of office spaces and makes the employees more productive.
Last but not least, home office raised the importance of people's “home sweet home” dramatically. The Luxembourgish are staying at home for more than one year now and many are realizing that their own property needs a makeover or more space is needed generally.
All these kinds of direct and indirect effects of the COVID 19 pandemic are now influencing the Luxembourgish residential real estate market in different ways.
On one hand, the desire for more security due to an uncertain future brings homeowners to a point where they don’t dare to sell their property in the current situation. On the other hand, the government is pushing a never-before-seen amount of fresh money into the markets which, in contrast to 2007, is getting directly into the people's pocket. This campaign, paired with low-interest rates, is forcing people to invest their money in real estate. Properties are still seen as the safest asset class with a return on investment between 2-4 %. The only alternative but much riskier assets are stocks.
“This combination of reduced supply of new property listings and very high demand will mid and long term influence the prices to go up”, says Philipp Niemann, Managing Director of Engel & Völkers in Luxembourg. A circumstance the real estate specialist noticed already in the first weeks of the new year.
Another topic is the remote work strategy that many companies are implementing since the beginning of the pandemic. This has prevented the immigration of an important number of international employees for 13 months. A trend that Engel & Völkers Luxembourg especially recognizes in their rental department, where the number of requests decreased in the last months. This trend has a direct influence on rental prices. A lot of short-term rental accommodations are now on the market. But also long-term rental properties need more time to find the right tenant. Engel & Völkers Luxembourg always have a high demand from international ex-pats. Due to the Corona Pandemic, they are not able to realize their relocation to Luxembourg.
With average prices of 25€ per m² in the city center and 18€ per m² in the outskirts and maximum prices of 28€ m², rental prices are still on a very high level. Should the pandemic go on like today, we will see more pressure on the rental prices because of missing international tenants. Furthermore, Engel & Völkers Luxembourg sees steady growth of short-term rental demands. Before an entire family moves to Luxembourg people often try to bridge the probation period of their job with fully furnished short-term rental apartments. This is a trend Engel & Völkers Luxembourg is not only recognizing in Luxembourg. “We recognize this trend as a general one in European metropolitan markets based on the wish for more flexibility”, says Philipp Niemann.