When moving to a new country, renting your new home is the most obvious choice. However, if you are planning to expatriate to Luxembourg for a few years, there are certain elements that should encourage you to become a homeowner as soon as you arrive or rather quickly.
Advantageous real estate taxation in Luxembourg
One of the first reasons to buy a home is that the tax system for owning a primary residence is favorable in Luxembourg.
Limited notary fees on the main residence: Bellegen Akt
When buying a property, buyers must pay notary fees when signing the deed of purchase at the notary’s office. These fees, called registration fees, amount to 7% of the price of the property, of which 6% are registration fees and 1% are transcription fees.
The Bëllegen Akt reduces these registration fees for the first purchase of a primary residence in Luxembourg. This measure, intended to encourage the acquisition of a principal residence, establishes a tax credit of 30,000 euros per purchaser.
This new amount introduced by the law of May 16, 2023 also provides for a retroactive reimbursement of the additional tax credit (from 20,000 previously to 30,000 euros) for notarial deeds executed as of March 7, 2023.
The application for refund can be made from a form set up by the tax authorities. More information about the Bellegen Akt tax credit.
To benefit from this tax gift, you must personally live in your new home for at least 2 years. If you leave the home before the required 2 years, you will be required to repay the money. On the other hand, you can rent this property beyond these 2 years, without this tax advantage being called into question.
The notary’s fees are also relatively limited on the transfer of property. See the costs of acquiring a property.
Reduced housing VAT for the main residence
In case of construction or renovation of a house intended for the main residence, the Luxembourg government offers a super-reduced VAT rate of 3% instead of 17%. However, this tax break cannot exceed €50,000 per home. A prior request must be made to the municipality where the accommodation is located.
Any purchaser of a new home intended as a primary residence can benefit from this reduced VAT rate.
Low property taxes for owners of their primary residence
The property tax is a tax calculated on built and unbuilt real estate. It is payable annually to the municipality where the property is located.
The tax rate is determined by each municipality and is applied to the unit value of the property. The unit value is specified to the owner through a bulletin sent by the Real Estate Appraisal Division.
Very low until now, a new law applicable as of 2026 reassesses the amount of the property tax. Homeowners will benefit from a discount on the property taxes of their primary residence. On the other hand, empty homes and undeveloped land will be taxed severely.
See here the governmental property tax calculation simulator.
Exemption from capital gains tax on the principal residence
In Luxembourg, the potential capital gain realized upon the resale of one’s principal residence is in principle tax-free.
A property occupied by its owner at the time of sale is considered a principal residence. The property must
- have been occupied since acquisition
- or occupied during the 5 years preceding the sale
- or be sold for imperative family or professional reasons.
In all cases, the sale must take place no later than December 31 following the year of the move.
If the house sold is unoccupied at the time of the sale, it will be necessary to meet the 3 following conditions, to benefit from the exemption of the capital gain:
- to have occupied the dwelling immediately after the acquisition
- and not be the owner of another home such as a second home or pied-à-terre
- and the sale must be for compelling business or family reasons.
It should be noted that the main residence in Luxembourg can be different from a tax domicile abroad.
Deduction of the costs of obtaining a property
The costs of obtaining a building under construction, renovation or completed but not occupied can be deducted as part of the tax return if they were paid before the housing was occupied.
These include costs related to the opening of a real estate loan (deed of credit, mortgage fees, file fees, interest charges), property taxes.
For a resident, it can be a property located in Luxembourg or abroad. When the property is occupied, he will be able to continue to deduct the interest on the loan, even if it is his principal residence.
A non-resident must first file a tax return in Luxembourg, implying that he/she has taxable income in Luxembourg. This device can be interesting for border workers.
A couple can benefit from up to 10,000 € of deductible loan interest (+ 2,000 € per child) annually on the purchase of a property, regardless of its destination.
On the basis of these elements, it seems important to us toconsider the question of buying your main residence, as soon as you know that you will stay more than 2 years in Luxembourg!
What are the real estate fees to be expected when purchasing a property?
Investing in real estate in Luxembourg
An investment with great potential
In addition to financial reasons, the Luxembourg’s real estate market represents a high-potential, crisis-resistant investment. The fundamentals of the Luxembourg market are indeed solid.
- Luxembourg has a thriving economy within Europe
Luxembourg has returned in 2022 to growth similar to that experienced before the Covid crisis. With a GDP growth forecast of between 3 and 4% for the coming years, Luxembourg’s economic development exceeds the forecasts of its neighbors. - A constant increase in the population
With a constant growth and a population of more than 300,000 residents by 2050, theincrease in the population in Luxembourg generates an ever-increasing demand for real estate and a real pressure on the real estate market. - Too few new buildings
The annual shortfall in additional housing is estimated at 3,000 based on the number of new housing completions (source STATEC). The market remains tight despite the increasing number of new constructions. - A market that has demonstrated its resilience in the event of a crisis
Prices were little affected by the financial crisis of 2008. Prices only dropped by 1% in 2009 and then continuously increased by about 5% per year starting in 2010. We note a price increase of +10% since 2020.
Buying a property in Luxembourg
The trend in the real estate purchase market follows that of the rental market. The price per m² is constantly increasing. The prices of small areas are increasing most rapidly due to investors who are strongly attracted by the prospects of returns on real estate. After a spectacular increase in the new home market, it is now the old home market that is being driven up.
The legal framework of Luxembourg offers many advantages (see above): tax credit abatement on notarial acts, low property tax, low capital gains tax, deductible mortgage fees, etc.
Although very buoyant, the Luxembourg real estate market is no less complex. Considering a real estate investment requires a good knowledge of the local specificities. We advise you to go through a real estate agency for your housing search. They will be able to explain the market more precisely and provide you with their expertise on the Luxembourg residential market.
Confidence in the Luxembourg real estate market has been established for several years due to a favorable economic climate and a growing attractiveness for foreigners.
In Luxembourg, agency fees related to the sale of a property are charged to the seller. They are limited to 3% of the sale price.
Renting while waiting to find your dream home
The only point that should make you The main reason for choosing to rent before buying your main residence is the need to get to know Luxembourg better. To know in which Luxembourg commune or area of Luxembourg, consult our short guide to the best places to live. districts of the City of Luxembourg. It should already help you decide which neighborhoods fit your expectations and lifestyle.
In Luxembourg, the rental market is quite small. The increase in rents follows the overall increase in the real estate market. This average is mainly influenced by the surge in rental prices in Luxembourg City and Esch-sur-Alzette. These two cities, the two largest in the country, alone represent half of the supply of rental properties in the Grand Duchy.
However, this price increase hides disparities. In recent years, real estate experts have pointed out that the smaller the property size, the faster the rental price growth. This observation goes hand in hand with the evolution of demand. Luxembourg welcomes more and more students, trainees and young workers who initially go for the rent of a studio or a small apartment before considering a real estate purchase. The prices of large apartments or houses have remained stable over the past few years but are still very high. More and more families are moving outside the capital to quiet, green communities.
In Luxembourg, agency fees are charged to the tenant and usually amount to one month’s rent.
Learn more about renting in Luxembourg
Participatory financing in Luxembourg
Principle of crowdinvesting
More and more crowdinvesting platforms on the internet offer participative investments in start-ups or real estate investments. Entrepreneurs or real estate promoters can thus carry out their investment project without sufficient start-up capital. In return, the investors receive a stake in the financed company, but without necessarily obtaining a say in the management of the company.
Today, this principle is also valid in Luxembourg real estate. Investors can make investments in real estate development projects.
This crowdinvesting system is intended for people who are interested in investing in real estate projects, and who wish to invest in these projects. The entry ticket is determined according to the project. The average annual profitability of the project must be taken into account when making the investment.
The real estate market accessible to all
The Luxembourg real estate market offers opportunities that have not been available to the general public until now. Reducing the investment ticket through crowdfunding allows everyone to diversify their investment portfolio .
New participatory housing projects are also regularly launched. The City of Luxembourg has launched two participatory housing projects in Bonnevoie for 5 to 6 dwellings and in Belair for 8 to 9 dwellings. These participatory housing units reduce costs and allow people to participate more actively in the decisions made in the different phases of planning, design and construction. Moreover, from the outset, this system induces greater solidarity between the future inhabitants and more durable links. Could this be one of the keys to “living together”?
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