The BIL IMMO Index

Given the significant evolution of the housing market in Luxembourg, Banque Internationale à Luxembourg (BIL) has created an IMMO Index that will deliver precise analysis of this market. While a lot of comments have been made with respect to the evolution of prices, until now there has been no economic indicator reflecting the trend in the Luxembourg housing market based on economic indicators. BIL, in collaboration with PwC Luxembourg, has selected the key data and relevant indicators to develop the BIL IMMO INDEX, a synthetic indicator of the market over the last 35 years.

The BIL IMMO Index, updated on a semi-annual basis and available at www.bil.com, offers an historic perspective on the past 35 years of the Luxembourg housing market and features indicators that identify trends related to the core of the industry and the national economy.

Discover more on the BIL website

"The BIL IMMO index allows retail, professional and institutional investors to immediately understand the housing market trend on the basis of economic ratios and accurate methodological analyses," said Marcel Leyers, Chief of Corporate and Institutional Banking at BIL. "BIL aims to make this index a benchmark for the national housing market, adding to its already extensive range of property financing solutions. Its development shows BIL's determination to further its commitment to supporting the local economy."

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The BIL Immo Index in the 4th quarter of 2015

The BIL IMMO INDEX stood at 1.58 in the 2nd quarter of 2015.

The index stood at 1.81 in the last quarter of 2014 due to an unusually high number of building permits recorded during that time. Indeed, the number of permits to build houses and apartments more than doubled between the 3rd and 4th quarter of 2014. This can be attributed to legislative changes in housing VAT which took effect on 1 January 2015 and which prompted manufacturers to file building permits before the end of 2014.

Since then, the BIL IMMO INDEX has fallen to 1.58, which still puts the index into positive and moderate range, indicating a growth market. The index remained relatively high in the second quarter as housing prices rose 5.4% in Q2 2015 YOY, which is higher than the increase in rents (up 2% over the same period), and the population (up 2.4% between 2014 and 2015). Regarding the credit policy, the ratio of mortgage loans in the residential sector to GDP remained relatively stable in the 2nd quarter of 2015. The evolution of construction activity was moderate compared to that of the overall economy making the housing supply a factor limiting the risk of overvaluation in the housing market.

Going forward, PwC Market Research Centre and BIL will release updated findings on the Luxembourg housing market semi-annually.

Regional Analysis

The lack of regional data does not permit the calculation of an index by region, as regional analysis is based on cross-analysis of the following variables:

  • Demographics: population and demographic growth
  • Prices advertised for the sale of houses and apartments
  • Price advertised for rental homes and apartments

The regional analysis below is based on population data as of 1 January 2015, and the prices announced up to Q1 2015, as well as their recent developments. Price dynamics in each region are compared to national dynamics, and are crossed with demographic change. Risk levels are weighted 1 to 5, and the interpretation is as follows:

  • Level 1: negligible risk of contraction in short-term price
  • Level 2: low risk of contraction in short-term price
  • Level 3: moderate risk of contraction in prices
  • Level 4: average risk of contraction in prices
  • Level 5: risk sustained contraction of prices

On the proposed scale, no region is currently estimated at a 4 or 5 risk of contraction in prices. The risks are negligible to moderate.

Please hover over the map to view our BIL IMMO Index analysis per region

The sources used are STATEC for demographics and the Observatory of Housing for the prices advertised for sale and to rent. Other elements such as regional economic dynamism and the number of completed residential buildings can be considered according to the availability of relevant data.

This data should be considered with caution since prices for sale and rent are advertised prices. In addition, the real estate market in Luxembourg reveals significant variations from one quarter to the next.


Notes:

1. STATEC, indice des loyers d’habitation réels
2. Observatoire de l’Habitat, prix annoncés à la location d’appartements
3. STATEC, indicateur de confiance dans la construction
4. STATEC, autorisations de bâtir : nombre d’appartements et nombre de maisons
5. Estimations basée sur la taille moyenne des ménages privés (2.41 personnes en 2011, donnée la plus récente).

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