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From a researcher’s perspective, why is it useful to analyse market sentiment? What can it reveal?

By examining the sentiment and expectations of market players, we can better anticipate short- and medium-term dynamics. The way professionals perceive the market has a direct impact on how prices evolve.

The Luxembourg real estate market has gone through turbulent times. Between 2017 and 2022, property prices soared, with double-digit annual increases. Then, in 2023 and 2024, residential prices fell by 15 to 20%. More than ever, it is crucial to understand how professionals see the future.

What are the main findings of this survey?

Overall, there is a return of confidence, particularly over the medium term. While the current period remains difficult for many players, looking ahead five years, professionals are more optimistic, anticipating renewed growth in activity, prices and rents in the residential sector. For offices, the trend is also becoming more favourable after years of uncertainty. It is in the retail segment that expectations remain the least positive, due to structural challenges specific to the sector.

What is driving this renewed confidence?

Several factors explain this more positive outlook. Following the correction in prices and the easing of interest rates, households are regaining purchasing capacity. At the same time, the market continues to face a structural housing shortage. Luxembourg needs at least 4,000 to 5,000 new homes per year, but this target has not been met in recent years. This imbalance between supply and demand is supporting the market.

Should we expect significant price increases again?

The expectations expressed suggest a healthier trajectory, with more moderate price increases, below 3% per year over the medium term. The rapid rise in prices between 2017 and 2022, followed by the shock of higher interest rates, pushed housing out of reach for many. Real estate prices cannot remain disconnected from residents’ purchasing power – in other words, from income trends.

What are the main obstacles to market development today?

The survey results confirm what the Housing Observatory has been highlighting for years: land costs are the primary obstacle, accounting for up to 50% of the final property price. All respondents agree this is a major barrier, and it remains a critical issue for many developers. Construction costs, which have risen significantly in recent years, are also a concern, though respondents expect material prices to evolve more moderately going forward. Nonetheless, housing costs remain a central challenge, as they affect the country’s attractiveness and could undermine the market in the long term.

How can these obstacles be addressed?

It is essential to improve access to land at fair prices, in order to ensure sufficient housing production and prevent further price escalation. Luxembourg has solid strengths, as confirmed by the survey, including its stability and fiscal environment. The priority now is to restore confidence among all market players – starting with investors – to restart a positive and sustainable market dynamic.

What should be the next step following this survey?

This first edition clearly demonstrates the value of such a barometer. It highlights encouraging signals – such as the return of confidence over the medium term, particularly in residential and rehabilitation projects – but also major challenges, from financing access to cost pressures. By giving professionals a voice, LuxReal has paved the way for regular monitoring of confidence, expectations, and risks in the sector. Looking ahead, an annual edition would allow for long-term trend analysis and provide a basis for comparing Luxembourg’s market developments with those of other European countries.