Luxembourg warns: ECB understanding of Luxembourg’s micro real estate market overvalued by 610%
Looking at the current market my only thought is “yeah, no shit.”
>However, ECB notes that while the overvaluation estimates and the methodology ensure consistency across countries, they may not necessarily account for country-specific factors.
Is something actually overvalued if people buy at said prices?
I also fail to see how “price-to-income ratio” is relevant here.
My view is that new builds were (are still??) wildly overepriced.
I also firmly believe that if I put my place on the market right now with such a large discount, it’ll sell immediately, despite the current conditions. This makes me think that there’s a middle ground somewhere….
People have been saying the market is overvalued since I arrived 17 years ago. And since then we had the 2008 implosion – and still the prices rise. Go figure.
you mean the 60 sqm apartment getting built next to me isn’t worth a million euros?
and this ladies&gentlemen is how they you from buying (IF you have the means too), it‘ll just keep getting higher
Of course that ECB does not know what every property owner in Luxembourg knows and that is that thousands of foreign workers will come to buy 1M 2bedroom in Mamer or 1M 1bedrom in Cloche d’or.
I never liked when those “math” people give me some graphs. Don’t bother with price-to-income ratio. Hard to understand. I know that foreign workers will do anything for little of Luxembourg property chase.
61%? Take any house from 2022 and list it at 61% off and it will sell in a day.
25-30%? Probably, yeah.
Anyone found the original report they are quoting? I digged a bit but wasn’t able to
Supply and demand matter much more than a bunch of fundamental ratios, which essentially measure the outcomes rather than the inputs
Hey it’s only 62% now wait till it reaches 200 – 300% and people will still just because that’s the only way to get your place p Other countries cities are setting the example sadly.
Alternatives (such as real estate) are detached from fundamentals-based valuation for years. Whether the Lux market is overvalued (and for how much) can be better ascertained by the gap between ask to final feed prices (which is growing now). As someone said, 61% seems rather exaggerated, this would mean that a 1bdroom in the city would sell for 200k, a 2bdr between 250-350k and a 3 bdr for 400-500k. They would fly out of the shelves at those prices
“These estimates are based on “price-to-re ratio, price-to-income ratio and two model-based methods (for details, see Box 3 in Financial Stability Review, ECB, June 2011 and/or Box 3 in Financial Stability Review, ECB, November 2015). (source ECB SDW).”
The big question is if the current prices are sustainable over the next 5-10y. My guess, could be. Demand is still here. It lately decreased due to the interest rate hikes. But if in 2-3y interest rates stabilize at say 3%, the demand will return. People need housing and don’t really have a choice. Plus, if construction stalled now, things might even get worse. My guess, a drop today of say 10-15% and a rebound in 2-3y. Disclaimer, i just signed a compromise de vente.
Was there not an independent report around 3 years ago commissioned by the government (“independent”) that came back and said there was no bubble in Lux? Crazy that ECB now come along and find the polarised opposite.
Also, height of irony that the EU commissions a warning re: this topic given the part the EU institutions play on house prices in Lux….
I’ve been to Panama City not that long ago and a 100 sqm apartment with ocean views on the 25th floor of a building with private pool, gym, supermarket and 24h security is between 200000$-300000$. Now I know it’s a completely different part of the world. It was just such a stark contrast between that and here where 30sqm studios are gobbled up for 500000 euros by people who can barely afford it.
Look at all these 100k salaries…
Joke is on them! I bought at the highest point!
Just 61%?
The link seems broken. Can someone provide a new one ?
For sure there is overall overvaluation and a correction under way.
For me the question is whether new builds will be hit harder or existing properties.
As a potential buyer I see much greater risk from new build as there is no return for investors at current interest rates.
I’d be happier buying an existing property as there is still plenty of underlying demand for houses – the main issue is mortgage interest rates
Guys, I will share my experience as a recent seller (last week) and buyer (1 year ago). This is not a market view, everyone is free to make its own decision.
Just a quick background. Arrived in 2013 in Lux, met my future wife in a big 4, married with 3 Kids today. We bought a 2-bedrooms flat (80 square meter) + garage at the end of 2016 following our wedding. Very easy financing conditions at that time in Bertrange for 450k (on busy road but its ok we get used to it 😀).
A little more than 5 years later, the family is growing we plan to have a third kid in early 2022. So we decide to look after a bigger flat (at least 3 bedrooms). We want to stay in Bertange as we are happy with local school / maisons relais / crèche and we finally find a small house (attached) with a price comparable to some 3-B flats around 1.2 M. Financing rate were starting to raise as they anticipated ECB future decisions. We still manage to get a 2% rate.
The value of our flat to sale were at that time estimated at 800k. Of course, we knew that we certainely would not sell at that price so we apply a 10/15 % haircut in our own budget. We decreased the price two times (September 22 and January 23) after nice discussion with our agency. We had a lot of visits but no proposal. Price decrease attracted investors and we agreed on a final price of 710k with buyers (couple of investors for renting the flat) and gave the keys this week. They already find a tenant for june.
I have no view on the future of the housing market, too difficult to predict. And it also depends on each individual case. In our case it was better to decrease the price and sell it than wait.
Some people will wait coz they prefer paying more the bank, have cash to wait. Other will decrease the price.
Knowing quite well the bertrange / strassen area accommodation that decrease the price by just 10% are still signed.
Sorry if you find it too long, just my modest recent experience to share.
La chance, tout le monde est blindé au Lux et tout le monde vie dans un rêve
I am working on the securisation side of finance.
Local retail banks started to check for our products, simply, they are looking their options to sell under performing loans, not now but in near future. Unfortunately, the economy of Lux will decline, mainly the SMEs
27 comments
Luxembourg warns: ECB understanding of Luxembourg’s micro real estate market overvalued by 610%
Looking at the current market my only thought is “yeah, no shit.”
>However, ECB notes that while the overvaluation estimates and the methodology ensure consistency across countries, they may not necessarily account for country-specific factors.
Is something actually overvalued if people buy at said prices?
I also fail to see how “price-to-income ratio” is relevant here.
My view is that new builds were (are still??) wildly overepriced.
I also firmly believe that if I put my place on the market right now with such a large discount, it’ll sell immediately, despite the current conditions. This makes me think that there’s a middle ground somewhere….
People have been saying the market is overvalued since I arrived 17 years ago. And since then we had the 2008 implosion – and still the prices rise. Go figure.
you mean the 60 sqm apartment getting built next to me isn’t worth a million euros?
and this ladies&gentlemen is how they you from buying (IF you have the means too), it‘ll just keep getting higher
Of course that ECB does not know what every property owner in Luxembourg knows and that is that thousands of foreign workers will come to buy 1M 2bedroom in Mamer or 1M 1bedrom in Cloche d’or.
I never liked when those “math” people give me some graphs. Don’t bother with price-to-income ratio. Hard to understand. I know that foreign workers will do anything for little of Luxembourg property chase.
61%? Take any house from 2022 and list it at 61% off and it will sell in a day.
25-30%? Probably, yeah.
Anyone found the original report they are quoting? I digged a bit but wasn’t able to
Supply and demand matter much more than a bunch of fundamental ratios, which essentially measure the outcomes rather than the inputs
Hey it’s only 62% now wait till it reaches 200 – 300% and people will still just because that’s the only way to get your place p Other countries cities are setting the example sadly.
Alternatives (such as real estate) are detached from fundamentals-based valuation for years. Whether the Lux market is overvalued (and for how much) can be better ascertained by the gap between ask to final feed prices (which is growing now). As someone said, 61% seems rather exaggerated, this would mean that a 1bdroom in the city would sell for 200k, a 2bdr between 250-350k and a 3 bdr for 400-500k. They would fly out of the shelves at those prices
Could you provide with your source please ?
The article probably refers to the following estimate: https://sdw.ecb.europa.eu/quickview.do;jsessionid=86585A2A8A8124F912E2C0EFAB973CDC?SERIES_KEY=432.RESV.Q.LU._T.N.RTF.RVAV.4F0._Z._Z.PT
“These estimates are based on “price-to-re ratio, price-to-income ratio and two model-based methods (for details, see Box 3 in Financial Stability Review, ECB, June 2011 and/or Box 3 in Financial Stability Review, ECB, November 2015). (source ECB SDW).”
The big question is if the current prices are sustainable over the next 5-10y. My guess, could be. Demand is still here. It lately decreased due to the interest rate hikes. But if in 2-3y interest rates stabilize at say 3%, the demand will return. People need housing and don’t really have a choice. Plus, if construction stalled now, things might even get worse. My guess, a drop today of say 10-15% and a rebound in 2-3y. Disclaimer, i just signed a compromise de vente.
Was there not an independent report around 3 years ago commissioned by the government (“independent”) that came back and said there was no bubble in Lux? Crazy that ECB now come along and find the polarised opposite.
Also, height of irony that the EU commissions a warning re: this topic given the part the EU institutions play on house prices in Lux….
I’ve been to Panama City not that long ago and a 100 sqm apartment with ocean views on the 25th floor of a building with private pool, gym, supermarket and 24h security is between 200000$-300000$. Now I know it’s a completely different part of the world. It was just such a stark contrast between that and here where 30sqm studios are gobbled up for 500000 euros by people who can barely afford it.
Look at all these 100k salaries…
Joke is on them! I bought at the highest point!
Just 61%?
The link seems broken. Can someone provide a new one ?
For sure there is overall overvaluation and a correction under way.
For me the question is whether new builds will be hit harder or existing properties.
As a potential buyer I see much greater risk from new build as there is no return for investors at current interest rates.
I’d be happier buying an existing property as there is still plenty of underlying demand for houses – the main issue is mortgage interest rates
Guys, I will share my experience as a recent seller (last week) and buyer (1 year ago). This is not a market view, everyone is free to make its own decision.
Just a quick background. Arrived in 2013 in Lux, met my future wife in a big 4, married with 3 Kids today. We bought a 2-bedrooms flat (80 square meter) + garage at the end of 2016 following our wedding. Very easy financing conditions at that time in Bertrange for 450k (on busy road but its ok we get used to it 😀).
A little more than 5 years later, the family is growing we plan to have a third kid in early 2022. So we decide to look after a bigger flat (at least 3 bedrooms). We want to stay in Bertange as we are happy with local school / maisons relais / crèche and we finally find a small house (attached) with a price comparable to some 3-B flats around 1.2 M. Financing rate were starting to raise as they anticipated ECB future decisions. We still manage to get a 2% rate.
The value of our flat to sale were at that time estimated at 800k. Of course, we knew that we certainely would not sell at that price so we apply a 10/15 % haircut in our own budget. We decreased the price two times (September 22 and January 23) after nice discussion with our agency. We had a lot of visits but no proposal. Price decrease attracted investors and we agreed on a final price of 710k with buyers (couple of investors for renting the flat) and gave the keys this week. They already find a tenant for june.
I have no view on the future of the housing market, too difficult to predict. And it also depends on each individual case. In our case it was better to decrease the price and sell it than wait.
Some people will wait coz they prefer paying more the bank, have cash to wait. Other will decrease the price.
Knowing quite well the bertrange / strassen area accommodation that decrease the price by just 10% are still signed.
Sorry if you find it too long, just my modest recent experience to share.
La chance, tout le monde est blindé au Lux et tout le monde vie dans un rêve
I am working on the securisation side of finance.
Local retail banks started to check for our products, simply, they are looking their options to sell under performing loans, not now but in near future. Unfortunately, the economy of Lux will decline, mainly the SMEs
Everything in Luxembourg is overvalued 🤷🏼♂️