Becoming a homeowner: what you need to know
With more than 15,000 new residents each year, the real estate market in Luxembourg is booming. With tax incentives on the rise, buying property in Luxembourg is a profitable investment.
Eric Thill from the AXA agency in Hobscheid provides an overview to guide you through your real estate purchase.
A constantly growing real estate market in Luxembourg
Real estate growth in Luxembourg has been steadily increasing in recent years. Despite a readjustment in real estate prices in recent months due to rising interest rates, real estate prices are reaching new heights. Meanwhile, expected rents are rising even more, and rental investment remains very attractive.
This inflation per square meter is favorable to buyers. They see real estate in Luxembourg as a very profitable investment. Even though it is now becoming increasingly difficult to obtain loans due to rising interest rates, buying real estate for rental investment remains an attractive investment.
Indeed, while the real estate acquisition market is tightening, rents are soaring and therefore the return on investment remains attractive.
Meet real estate professionals at the Home Expo trade show.
Why buy in Luxembourg? Attractive tax rates
Real estate growth is driven by tax incentives from the Luxembourg government, which wants to make home ownership accessible to as many of its residents as possible.
Home ownership and Bellegen Akt
Firstly, buyers of their primary residence can benefit from a tax allowance on the purchase of their home, as well as a tax credit on notarial deeds – see Bellegen Akt. Transaction costs are limited, property tax is low, and loan interest is tax deductible.
Tax deduction for mortgage costs
Mortgage interest is tax deductible on taxpayers' income tax returns.
In addition, buyers of real estate also benefit from a tax credit on their mortgage insurance (outstanding balance insurance). This insurance is mandatory when taking out a bank loan and protects you and your family in the event of hardship.
Your AXA agency can help you set up death or unemployment insurance for your mortgage with a financial institution.
Variable prices in the Luxembourg real estate market
Real estate prices vary greatly in Luxembourg.
Geographical disparities in housing prices
There is a significant disparity in prices per square meter for housing between Luxembourg City and the rest of the country, particularly the north.
When looking to buy property in the capital, the price per square meter for an existing apartment is over €10,000. If you move away from the capital, for example to Hobscheid in the west, Wiltz in the north, or Echternach in the east, the average price per square meter drops to €6,000.
Price differences between new and old properties
There is also a difference between the price of new and old properties, although this difference is becoming less pronounced. For a new apartment in the capital, the price per square meter rises to €15,000 or even more for some new properties. The best way to keep track of market trends is to visit the Observatoire de l'Habitat website.
Price differences depending on the number of rooms and surface area
The price of real estate also depends on the size of the property and the number of rooms.
The price per square meter for a studio apartment is generally higher than for a four-bedroom apartment or larger. The investment market is driving prices up, with the prospect of higher returns.
Find out more about the real estate market in Luxembourg.
The steps to buying in Luxembourg
To become a homeowner, and if they wish to obtain a mortgage, buyers must be able to provide a personal contribution of 20% or even 30% of the purchase price. This is especially true today with the rise in interest rates. Luxembourg banks are becoming increasingly cautious on this issue.
This explains why many people are no longer able to buy their own home without sufficient personal funds. See the cost of living in Luxembourg.
Once your mortgage has been approved, you will need to take out insurance on your mortgage. This measure, which is systematically imposed by banks, will protect your family in the event of an accident. Be sure to carefully review the coverage offered by this life insurance policy. An insurer is highly qualified to assist you in this process.
Once you have found your apartment or house and signed the preliminary agreement, the deed of sale must be drawn up by a notary of your choice. For more information on this subject, we recommend visiting the Luxembourg notary association website or contactingthe real estate agency handling the sale. They often work with the same notary to facilitate the transaction.
Are you ready to take the plunge and become a homeowner in the Grand Duchy? Get help with all your insurance needs from the AXA Eric Thill agency in Hobscheid, at 26d, Grand-Rue L – 8372 Hobscheid, tel: 27 39 27 1, eric.thill.agent@axa.lu.
Being properly insured is important! Find all the information you need here.
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