Housing costs in Luxembourg – going up at an alarming rate

Eurostat study shows the rise of housing prices across the EU

In the last year, housing prices across the EU have gone up, however, Luxemburg tops the chart. This was made evident by a report from Eurostat, published on Thursday, 8 June 2021.

Prices increased by an average of 6.1% across the bloc, compared with the beginning of 2020 – the steepest annual increase since 2007. Meanwhile, the prices in Luxembourg have gone up by a whopping 17% compared to last year, a jump of 12 percentage points higher than the EU average.

Denmark saw the second-highest rise at 15%, followed by Lithuania and the Czech Republic at 12% and the Netherlands at 11%. The only country where prices fell was Cyprus, at -6%.

The strange phenomenon of housing deflation

Housing deflation is another big problem in Europe in general. This term refers to a disbalance between inflation in a given country’s market overall and the housing prices.

In fact, for the first time in at least 20 years, housing prices increased more than the inflation across the board in the European Union. Here Luxembourg “shines” with the difference between prices and inflation sitting at more than 13%. For comparison, the runner-ups – Croatia and Portugal, sit at a humble 7.4%, and Slovakia at 7.2%.

 Deflated housing prices by a member state in the European Union, 8 July 2021, Source: Santosv on Eurostat

Despite multiple efforts to provide affordable housing and combat the crisis, this trend does not board well for the EU housing market of tomorrow.

Luxembourgers are fleeing for neighbouring countries

Over 70,000 Luxembourgers have left the Grand Duchy to live in Belgium, Germany and France, with the latter being the most popular destination, welcoming 28,000 “housing refugees”.

This is not a major surprise, considering that Luxembourg is famous for its eye-watering housing prices. Recently, according to another Eurostat publication, Luxembourg’s housing costs were determined to be a staggering 70% more expensive than the EU average.

According to Statec, the Luxembourg statistical agency, the average price of a house in the city is 1,35 million euros. Of course, the price goes down in the surrounding countryside, but the national average sits at about 900,000 euros.  

Whether or not this unsustainable trend keeps on going remains to be seen.