On a tense real estate market like in Luxembourg , negotiating the buying price can seem difficult if not impossible. With demand largely exceeding supply, sellers often have the upper-hand and are unwilling to accept a lower purchase offer. The following advice should help you to be more informed when you tackle negotiations.
Analysing the property and its environment
Depending on the housing type and the area in which it is located, a property may be more or less easy to negotiate. In order to know if there is a margin of negotiation, you should analyse three points:
- Property location. The geographical location and the attractiveness of the surroundings are the main factors that impact the liquidity of a property. A home located in Luxembourg city or in a neighbouring municipality will have a weaker negotiation margin compared to the same home in the north of the country. If the average gap between the listing price and the buying price on the national level is 14,9% (Observatoire de l’Habitat, 2015), it will be very difficult to engage in negotiations in Luxembourg city with an offer below 5% of the listing price.
- Property type. The higher the property demand, the lower the negotiation margin. For example, 1 or 2 bedroom apartments as well as houses priced up to one million euros boast a much stronger demand. Benefiting from various tax cuts, studios and apartments up to 6 years old are in high demand especially among investors, and therefore offer very low negotiation margins.
- Property specifics. Houses without parking spaces or a basement, or property that has an unsuitable number of bedrooms compared to its size are often more difficult to sell. You should put these elements forward when negotiating.
Benefiting from various tax cuts, studios and apartments up to 6 years old are in high demand especially among investors, and therefore offer very low negotiation margins.
Understanding property pricing is key to negotiating
Before starting negotiations, knowing your financial capacity is essential. To do so, simulate your loan on my|PROJECT, as it will allow you to know where you should set your limit before entering negotiations.
Whatever the property and its localisation, keep in mind that the inherent negotiating power lies within the difference between the listing price and the reality of the market in which the property is located. A property listed too high (putting it off-market) will have a much lower demand, forcing the seller to consent to a price drop. This means that you should know if the listing has been online for a long time or not beforehand.
(…) the inherent negotiating power lies within the difference between the listing price and the reality of the market in which the property is located.
Understanding the neighbourhood or municipality’s market dynamics, as well as actively monitoring listings are good practice to be more confident when making your offer. The online evaluator my|VALUATION helps you get an idea of the property’s indicative value before formulating a realistic offer. You should develop a solid argument beforehand, as you may have to justify why your offer is below the listing price.
Be cautious about property requiring renovation work. It is highly advised to schedule a second visit with a renovation professional before formulating any purchase offer. A professional will evaluate the renovation costs, which will allow you to project yourself financially to avoid bad surprises after the purchase. Having a price quotation for the estimated renovation work is also an additional argument when negotiating with the seller.
Taking in account all the points raised, and if you consider that the price of the property is justified compared to the state of the market, discussions could be counterproductive. It is sometimes wiser to make an offer at the listing price rather than to start long negotiations that may disqualify you in the eyes of the seller. Sometimes, it’s better to pay the price for your ideal home rather than successfully negotiate a home that doesn’t fully appeal to you.