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 two years or more, there are a number of factors that should encourage you to become a homeowner.
Advantageous real estate taxation in Luxembourg
Fisclity is one of the main reasons for buying a home in Luxembourg. In fact, the tax system for owning a principal residence is quite favorable.
Bëllegen Akt and main residence
When buying a property, buyers have to pay a fee when signing the deed of sale at the notary’s office. In general, these registration fees amount to 7% of the property price. They comprise 6% registration duty and 1% transcription duty.
However, when buying a principal residence, the new buyer benefits from reduced notary fees. The “Bëllegen Akt” reduces registration fees for first-time buyers of a main residence in Luxembourg.
Today, the “Bëllegen Akt” establishes a tax credit of 30,000 euros per purchaser. Previously 20,000 euros, this new amount introduced by the law of May 16, 2023 also provides for retroactive reimbursement of the additional tax credit for notarized deeds signed on or after March 7, 2023.
Beneficiaries of this retroactive measure can claim reimbursement of notarial fees overpaid. More information about the Bellegen Akt tax credit.
How can I benefit from reduced notary fees?
To benefit from this tax gift, you must personally live in your new home for at least 2 years. If you leave your home before the required 2 years have elapsed, you will be obliged to repay the sums granted. 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
Principal residences also benefit from a super-reduced VAT rate. For construction and renovation work, the Luxembourg government offers a VAT rate of 3% instead of 17%.
However, this tax break cannot exceed €50,000 per home as a principal residence. If work is to be carried out on the owner’s principal residence, the owner must submit a prior request to the municipality where the property is located.
Purchasers of new homes can also benefit from this reduced VAT rate, provided the property is to be their principal residence.
Lower property taxes for owners of their principal residence
The property tax is a tax calculated on built and unbuilt real estate. It is payable annually to the commune where the property is located.
The tax rate is determined by each commune. It applies to the unit value of the asset. The unit value is specified to the owner by the Real Estate Appraisal Division. So far, the property tax is very low, just a few dozen euros for a house with a garden.
From 2026, a new law will reassess the amount of 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 more heavily. The aim is to encourage owners to build or rent.
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.
To qualify, the property must
- have been occupied since acquisition
- or occupied during the 5 years preceding the sale
- or 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 cost of obtaining a building can be deducted from your property tax return .To do so, the building must be under construction, renovation or completed. The property may be located in Luxembourg or abroad.
These fees include the cost of opening a mortgage, as well as property taxes. Owners can also deduct loan interest, including on their principal residence.
A couple can therefore benefit from up to €10,000 in deductible loan interest (+ €2,000 per child) per year.
What are the real estate costs involved in buying a property?
Why invest 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 investment. The fundamentals of the Luxembourg market are solid.
Luxembourg boasts a thriving economy within Europe
By 2022, Luxembourg will have returned 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 steadily growing population
Luxembourg’s population is growing steadily. Forecasts predict a resident population of 1 million in 2050, compared with 700,000 today. Luxembourg’s growing population is generating ever-increasing demand for real estate. The real estate market is under pressure and homeowners continue to dominate the market.
Housing supply below demand
In Luxembourg, the number of new buildings is too low. 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 times of crisis
Prices in Luxembourg were little affected by the 2008 financial crisis. 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.
Real estate market on the rise overall
Growth in rental rates is now outstripping that of purchases. Rents per m² have been rising steadily, while purchase prices have been falling over the past year.
Prices for small surface areas are rising fastest. Investors are strongly attracted by the prospect of returns on real estate.
How do I go about buying a property?
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. That’s why we advise you to use a real estate agency when looking for accommodation. These real estate specialists will be able to explain the market in more detail and provide you with their expertise on the Luxembourg residential market.
What’s more, in Luxembourg, agency fees for the sale of a property are borne by the seller. They are limited to 3% of the sale price. So don’t hesitate to call in the professionals. They’ll be with you every step of the way.
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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