3 minSupporting our partners as the property market recovers
The residential property market is gradually emerging from the crisis. Experts at Banque de Luxembourg explain the factors behind the recovery. Developers and their banking partners need to adapt to a changed environment.
After a major crisis, what changes are we now seeing in Luxembourg’s residential property market?
Michel Weckering: We’re currently seeing two distinct market trends in the residential sector. On the one hand, activity in the existing property market is comparable to that seen before the crisis, with transaction volumes close to those recorded between 2016 and 2022. Rents have also continued to rise over the past two years, demonstrating the continued strength of structural demand for housing. At the same time, though, the new-build market is recovering more gradually, as buyers remain cautious in the wake of the crisis.
What are the prospects for 2026?
M.W.: Market fundamentals remain solid. There is still an imbalance between supply and demand, and the housing shortage has not gone away. Confidence is one of the key challenges for the recovery. Buyers are less willing to purchase off-plan, but once a project is under construction, sales tend to gather pace. They want guarantees and greater certainty about delivery.
Astrid Schlesser: The gradual return of investors to the market could prove to be a significant driver of the recovery. Even if the government doesn’t introduce new support measures for the property market, the combination of high rents, stable interest rates and strong fundamentals is once again creating attractive investment opportunities.
Many prospective buyers have been delaying purchases in the hope prices will fall. Do you think the market has stabilised?
Nathalie Welbes: The data point to a fairly stable trend over the longer term. The price of apartments rose by an average of around 4.7% per year between 2010 and 2025. The sharp increases seen between 2017 and 2021 were signs of an overheated market. When the crisis hit, prices adjusted, which effectively froze decision-making: buyers held back in the hope that prices would fall, and the market stalled. That is no longer the case today. The general expectation of falling prices is behind us, the outlook is clearer and transaction volumes have already picked up significantly.
Given this environment, should developers return to building on spec?
A.S.: Developers clearly have to adapt to this new reality.
Does that make financing one of the main challenges?
A.S.: Absolutely. Not all developers have enough equity to launch projects without significant pre-sales, and it's no longer realistic to require pre-sales of 70-80% before construction can begin. In the current environment, developers with sufficient liquidity are better positioned to move forward with projects. But this also means they have to adapt their business models to better assess risk and make sure their projects are financially sound. Banks also have a key role to play.
What is Banque de Luxembourg’s approach to working with developers?
N.W.: Our aim is to be a long-term partner for the market, going well beyond simply providing financing. We work closely with market participants, carrying out detailed, case-by-case risk assessments so that we can offer tailored solutions. Each project is assessed individually, taking into account factors such as location, quality, the financial strength of the counterparty, the cost structure and the contracts in place with construction companies. Our top priority is to establish the confidence needed for projects to move forward.
M.W.: We are committed to fulfilling our role as a trusted partner for developers, and that means continuously refining our models and adapting to new market realities. We can be involved at every stage of a project: financing land acquisition and construction, issuing completion guarantees and arranging long-term financing for institutional investors. Our goal is to help ensure that the market recovery is stable and sustainable.
I would be happy to discuss how we could support your project.
