Luxembourg's public housing fund doubles homes under construction as building freeze eases

Luxembourg's largest public housing developer more than doubled the number of homes it had under construction over the course of 2025, official figures show — the clearest sign yet that a building slump that has gripped the country since 2022 may finally be easing, even as private developers stay on the sidelines.

The Fonds du logement, the state-backed body that is also Luxembourg's biggest social landlord, reported 1,227 dwellings under construction at the end of 2025, up from 638 a year earlier, according to its annual report. The fund said it had 63 active building sites across the country and completed 116 homes during the year.

The acceleration was echoed by the Société Nationale des Habitations à Bon Marché (SNHBM), the other main public developer, which put a record 473 affordable dwellings into construction in 2025 — a 57% jump from 301 the previous year, which had itself climbed from 230 in 2023. SNHBM said 288 homes were completed and 1,335 remained under construction at year-end.

A rebound led by the State

Both institutions cast 2025 as a turning point after a freeze set off by sharply higher interest rates, rising construction costs and a collapse in demand that hit Luxembourg from mid-2022. The SNHBM described its figure as the highest in its history, with 136 of the 473 homes coming through a government programme to buy up off-plan apartments and the rest built directly.

Annick Rock, president of the SNHBM board, said the increase reflected "the continued efforts by the SNHBM to help increase affordable housing and to durably support the national affordable-housing policy." The developer's director general, Guy Entringer, credited work with local authorities: "Through the many partnerships we have built with the municipalities, we continue to develop projects tailored to local needs and to strengthen the supply of affordable housing across the country."

The public push is deliberate. The Fonds du logement has set a target of more than 5,000 additional dwellings over the next two decades, while the SNHBM holds a land reserve for some 3,032 homes and aims to build around 400 a year in the medium term. Flagship sites include the Elmen eco-district in Olm, Itzigerknupp in Luxembourg-Bonnevoie and the JFK project in Kirchberg.

The private market is still frozen

The picture from the wider market is far more sober. In its March 2026 edition of "Le Logement en chiffres," STATEC and the Housing Observatory reported that sales of new-build apartments — off-plan homes sold under so-called VEFA contracts, a proxy for private construction activity — remain the market's principal weak point.

Only 149 such apartments changed hands in the fourth quarter of 2025, down 54% from the previous quarter and 62% lower than a year earlier. Before the crisis, an average of 714 new apartments were sold each quarter between 2017 and 2021. Total apartment sales, including existing homes, fell 34% year-on-year to 1,145 in the same quarter.

The recovery of Luxembourg's residential property market is under way, but still incomplete and uneven across segments.

Prices, meanwhile, have stopped falling. The general house-price index was broadly flat over the year to the fourth quarter of 2025, and rose 1.6% over the full year — the first annual increase after drops of 9.1% in 2023 and 5.2% in 2024. STATEC also noted that the number of building permits granted fell by more than a third between 2022 and 2024, the pipeline problem that has starved the market of new supply.

Low base, or a genuine turn?

Some of the headline rebounds carry a warning. Sales of off-plan apartments roughly doubled year-on-year in the second and third quarters of 2025, but from historically depressed levels — and the surge was flattered by buyers rushing to complete before temporary tax breaks expired on 30 June 2025. Once those measures lapsed, activity fell back, underlining how fragile the private recovery remains.

That leaves the public sector doing much of the heavy lifting. The doubling of homes under construction is concentrated among state developers, whose projects depend on public budgets rather than the mortgage and financing conditions that continue to weigh on private builders. The European Commission expects construction activity to keep "recovering slowly," with investment in housing set to pick up only "slightly" in 2026.

For residents, the stakes are hard to overstate. Housing supply and affordability remain Luxembourg's defining domestic issue, and years of weak building have deepened a shortage that pushes prices and rents beyond the reach of many. The following figures capture where the market stood at the end of 2025:

• Fonds du logement: 1,227 dwellings under construction (638 a year earlier); 116 completed in 2025.
• SNHBM: 473 affordable homes started, a record and up 57%; 288 completed; 1,335 under construction.
• New-build apartment sales: 149 in Q4 2025, down 62% year-on-year and far below the pre-crisis norm of 714 a quarter.
• Prices: up 1.6% over 2025, the first annual rise after two years of falls.

Whether the public-sector surge marks the start of a broader turnaround, or simply a state-funded floor under a still-frozen private market, will depend on how quickly financing conditions ease and permits recover. On the evidence of 2025, the thaw has begun — but it is uneven, and far from complete.