Becoming a homeowner: what you need to know
With more than 25,000 newcomers each year and a net population growth of nearly 10,000, the real estate market in Luxembourg is booming. With an increasing number of tax incentives, buying real estate in Luxembourg is a profitable investment.
Luxembourg’s Real Estate Market Is Constantly Growing
Real estate growth in Luxembourg has been steadily increasing in recent years. Despite a recent adjustment in property prices due to rising interest rates, real estate prices are reaching record highs. Meanwhile, expected rents are rising even more, and rental investments remain highly attractive.
This rise in prices per square meter is favorable to buyers. They view real estate in Luxembourg as a highly profitable investment. Even though it is becoming increasingly difficult to secure loans due to rising interest rates, purchasing real estate for rental investment remains an attractive option.
Indeed, while the property purchase market is tightening, rents are skyrocketing, and thus the return on investment remains attractive.
Why Buy in Luxembourg? Attractive Tax Benefits
Real estate growth is driven by tax incentives from the Luxembourg government, which aims to make home ownership accessible to as many of its residents as possible.
Homeownership and Bellegen Akt
Indeed, first, buyers of their primary residence can benefit from a tax deduction upon purchasing their home, as well as a tax credit on notarial fees — see the Bellegen Akt. Transaction costs are low, property taxes are minimal, and mortgage interest is tax-deductible.
Tax Deduction for Mortgage Expenses
Interest on mortgage loans is tax-deductible on taxpayers’ income tax returns.
In addition, homebuyers also benefit from a tax credit on their mortgage insurance (outstanding balance insurance). Required to secure a bank loan, this insurance protects you and your family in the event of a financial setback.
Your insurance agent can assist you in setting up life or unemployment insurance for the mortgage you’ve taken out with a financial institution.
Variable prices in the Luxembourg real estate market
Real estate prices vary widely in Luxembourg.
Geographical Variations 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 a 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, west to Hobscheid, north to Wiltz, or east to Echternach—the average price per square meter drops to €6,000.
Price disparity between new and existing properties
There is also a difference depending on whether you buy a new or existing property, although this difference is narrowing. For a new apartment in the capital, the price per square meter can reach €15,000, or even more for certain new properties. The best way to track market trends is to visit the Observatoire de l’Habitat website.
Price differences based on the number of rooms and square footage
Real estate prices also depend on the property’s size and the number of rooms.
The price per square meter for a studio is generally higher than for a four-bedroom apartment or larger. The investment market is driving prices upward, with the prospect of higher returns.
Learn more about the real estate market in Luxembourg.
Steps to buying in Luxembourg
To become a homeowner, and if seeking a mortgage, a buyer must be able to demonstrate a down payment of 20% or even 30% of the purchase price. This is especially true today given rising interest rates. Luxembourg banks are becoming increasingly strict on this matter.
This explains why many people can no longer buy their own home without a sufficient down payment. See the cost of living in Luxembourg.
Once your mortgage is approved, you will need to take out a life insurance policy on your mortgage. This requirement, systematically imposed by banks, will protect your family in the event of unforeseen circumstances. Be sure to carefully review the coverage offered by this life insurance policy. An insurance agent is well-qualified to assist you with this process.
Once you’ve found your apartment or house and signed the preliminary sales agreement, the final deed of sale must be drawn up by a notary of your choice. For more information on this topic, we recommend visiting the Luxembourg Notary Association’s website or consulting the real estate agency handling the sale. They often work with the same notary to facilitate the transaction.
Ready to take the plunge and become a homeowner in the Grand Duchy? Let the AXA Eric Thill agency in Hobscheidguide you through all your insurance needs: 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 here.
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