Renting your home is often a natural choice when relocating to a new country. However some specific elements should incentivise you to quickly become homeowner in Luxembourg, even if you only consider living several years in Luxembourg!
First of all, do you know that more than 67% of residents in Luxembourg own their homes? Why such a percentage while real estate prices are high?
Taxes related to home ownership are favourable in Luxembourg
Transaction costs are limited
In Luxembourg, when purchasing a property, notarial deeds are subject to fees amounting to 7% of the property price, of which 6% are registration fees and 1% are transcription fees.
In order to encourage personal property acquisition, these costs are reduced to €100 (Bëllegen Akt) for any first purchase of the main residence in Luxembourg, up to €285,714 for a single person or €571,428 for a couple. This represents a tax gift of up to 20,000 euros per head or 40,000 euros for a couple, provided you live more than 2 years in your new residence. But nothing prevents you from renting this property beyond these 2 years, without this tax benefit being called into question.
Notary fees are also relatively limited on the transfer of ownership. More information about these registration fees.
Property tax is practically non-existent
In comparison to other neighbouring countries, the property tax is very low in Luxembourg. Being owner does therefore not generate a significant tax pressure that might justify remaining a tenant.
The capital gain is tax-exempt
Similarly to most countries, the potential capital gain realised on the sale of the primary residence is non-taxable. Whatever the amount might be.
Mortgage interests are tax-deductible
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. The deductibility of mortgage interest therefore makes the cost of borrowing very attractive in relation to the cost of renting.
On the basis of these elements, it seems important to us to consider the question of buying your main residence, as soon as you know that you will stay more than 2 years in Luxembourg! To calculate how many years it is more interesting to buy than to rent on the basis of your personal situation, there are calculation tools such as on the nexvia.lu website.
Significant growth for Luxembourg property market and resilience to crises
- A thriving economy in the centre of Europe
With a strong track record and a forecast of 4% annual growth in GDP (source World Bank), the Luxembourg economic development surpasses the performance of its neighbours.
- A steady increase of the population
With a forecasted 2.2% annual growth (source World Bank), the increase in population results in a surge in housing demand.
- An insufficient number of new constructions
The annual deficit in new homes is estimated to reach 3,000 units based on the number of delivery of new dwellings (source STATEC).
- A real estate market that demonstrated its resilience in case of crises
Property prices have been marginally impacted by the 2008 financial crisis (1% decrease in 2009 followed by a steady increase of +/- 5% since 2010).
Are you ready to invest? Why buying a new or existing property? Here are the intermediaries who can help you find the property of your dreams.
Do not forget to read our advice to prepare your real estate visits.
The only point that should make you opt for renting before buying is the need to know better your new country in order to know in which city or district of Luxembourg you might move in! Our little guide to the districts of the City of Luxembourg should already help you to choose.
Crowdfunding in Luxembourg
Principle of crowinvesting
More and more crowdinvesting platform on internet propose participatory investments in start-ups or real estate investments to enable entrepreneurs or developers to carry out their project, in the absence of sufficient starting capital. In return, investors receive a stake in the company financed, but without necessarily obtaining control in the management of the company.
Today, this principle is also valid in Luxembourg, among other things in real estate where investors can invest in real estate development projects.
This crowdinvesting system is intended for people interested in investing in real estate projects. The entry ticket is determined according to the projects, and the average annual profitability of the project must be taken into account before investing.
Several projects emanating from developers recognized on the Luxembourg market are studied by these platforms to choose quality residences that will be proposed to potential investors.
Real estate market more accessible
Luxembourg real estate market is offering interesting opportunities which were until now, not accessible to mainstream investors.
“By lowering the minimum investment tickets, anyone can now co-invest in real estate projects along with real estate professionals. We are proud to launch the first real estate crowdfunding project in Luxembourg. Our goal is to establish a long-term presence in the Grand Duchy and help to build tomorrow’s cities. – explains Johan Poor, VP of Bee Invested settled in Luxembourg. Many projects have been received but only one has been selected by the team Bee Invested. The project consists of a 9 apartments residency to be built in Pontpierre.
On the same principle, the City of Luxembourg has launched 2 participatory housing projects in Bonnevoie for 5 to 6 dwellings and in Belair for 8 to 9 dwellings. These participatory housing units thus reduce costs and allow the grouped people to participate more actively in the decisions made in the different phases of planning, design and construction. Moreover, from the beginning, this system induces a greater solidarity between the future inhabitants and more durable links. Would it be one of the keys to “Living together”?
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