The price of building land in Luxembourg City is six times more expensive than in municipalities in the north of the country, according to the conclusions of study published by the Observatoire de l’Habitat (Luxembourg’s Housing Observatory) this week.
“The differences in the prices of undeveloped land are very significant,” noted author Julien Licheron in his analysis, which is based on sales prices recorded between 2020 and 2022.
The analysis sought to divide prices in the country’s various municipalities into six classes, with class 1 grouping together the municipalities with the most expensive land prices and class 6 those with the least expensive.
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The results are hardly surprising. Prices fall the further the communes are from the capital. “Distance from Luxembourg City plays a very important role in this respect, as the spatial structure of prices and rents in Luxembourg is still very monocentric,” the report states.
“It is therefore land that is clearly driving price differences between communes on the residential property market,” Licheron writes.
Land is driving price differences
As expected, Luxembourg City is in class 1, surrounded communes in class 2, and a further ring of communes in classes 3 and 4. Class 5 and class 6 municipalities are located in the northern half of the country, with class 6 municipalities being furthest from the capital.
In terms of the value of a building plot itself, the median price across the country for the period 2020-2022 is €101,814 per are (1 are = 100 square metres). But this median price varies very widely: from €304,279 in Luxembourg City to just €49,743 in the class 6, municipalities around Esch-sur-Sûre and Troisvierges in the north.
The desirability of the capital is illustrated by the fact that the median price of land in Luxembourg City is even twice as expensive as in communes such as Hesperange, Walferdange, Strassen, Bertrange or Mamer that make up class 2, where it reaches €153,091 per are.
Heterogeneity within groups
In the second ring, which includes Bettembourg, Mondercange, Dippach, Kehlen, Junglinster and Contern, the price falls to €118,747, and prices are down to a median of €107,744 per are in class 4 communes which includes the larger cities in the south such as Esch-sur-Alzette, Dudelange, Differdange as well as towns like Käerjeng, Mersch and Grevenmacher.
In the northern-central towns of Bissen, Colmar-Berg, Diekirch, Ettelbruck and Echternach, which fall into class 5 communes, the median cost of an are of building land falls to €74,358
But that doesn’t mean that median prices per are are strictly identical in the different towns in the same group. “On the one hand, there is still a certain amount of heterogeneity within the groups, and on the other, the plots sold are often very different in the various communes, especially as the number of transactions remains limited in the vast majority of communes,” the Housing Observatory explains.
Plot characteristics play an important role
While the geographical location of a commune is an essential factor in the price of a building plot, the analysis also highlights other important factors. The study was based on a so-called “hedonic” model, which breaks down the final sale price of a plot of land according to its location in the country, but also according to its place in the commune’s general development plan (PAG) and intrinsic characteristics such as the surface area of the plot or its shape.
However, “a small number of characteristics of a plot of land play a major role in its sale price” the analysts noted. The larger the plot, the lower the price per acre, for example. Each additional acre reduces the price by an average of €4,858 (or 4.31%) per acre, according to the report
Results consistent with house prices and rents
The shape of the plot also plays a major role: the longer or more spread-out the plot, the lower its value. Conversely, a compact plot, close to the shape of a circle or square, will have a higher value, since the potential uses for this plot will be greater and the constraints less severe.
Its location in the PAG is also very important, depending on whether the plot is in housing zone 2 (for collective housing), which is much more expensive than housing zone 1 (for single-family homes) or in a mixed zone. Similarly, the higher the land-use coefficient, which determines the maximum amount of area that can be built on a specific plot, the higher the price.
This article was first published by Virgule. Translation and editing by Duncan Roberts