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Benefits of investing in real estate in Luxembourg

According to the estimations of the report "Real Estate 2020": Building the future, the global value of a real estate investment should increase by 55% between 2012 and 2020. This future prospect should encourage worldwide investors to “invest in bricks”.

Luxembourg residential market, for his part, is even more attractive for those investors. Indeed, the economic context of the country as well as the tax system foster many actors to invest in the Grand-Duchy, either for their main residence or for a rental investment.

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A safe and promising market

During the last decade, Luxembourg real estate market experienced a safe and quick development, unlike other European countries which were more marked by the economic crisis. This trend is particularly driven by the economic environment and the demographic growth of this small country with high aspirations.  

  • The economic forecast

The STATEC (Institut national de la statistique et des études économiques du Grand-Duché de Luxembourg) is now publishing projections regarding the economic context of the country in the middle term, that is to say for the 5 following years.

Its predictions concerning Luxembourg economy are highly favorable. Indeed, the national institute of statistics forecasts an economic growth of 4.5% in 2018 and 2019, approaching 3% in 2022.

This trend also predicts an increase of real estate prices as the economic context of a country is a major determinant of the structure of this market.

  • An housing offer far below the demand

Anoher vector of the real estate market trend is the ratio between the number of accommodation and demographic growth. In the Grand-Duchy of Luxembourg, the housing offer, including new projects, is still lower than the demand. This gap consequently induces a price increase of real estate in the whole country.

The advantages of Luxembourg tax-system

  • The tax credit on notarial acts

In Luxembourg, the acquisition of a real estate (house, apartment or building plot) goes hand in hand with the payment of registration fees and transcription fees. Overall, these fees account for 7%, which include 6% for registration fees and 1% for transcription fees.

The government introduced a deduction called tax credit on registration fees and transcription fees for all people who want to acquire a real estate for personal use. The existing law limits this tax credit to 20.000 euros and 40.000 euros for a pair. This envelope can be used on one or several real estates.

If you want more information, you can read our whole article about tax credit on notarial acts by clicking here.  

  • A very low property tax

The property tax is collected by the commune on built or not built real estate located in the territory of Grand-Duchy of Luxembourg. Nevertheless, this peoperty tax is very low for the majority taxpayers. Today, it only represents 1.5% of the communes’ revenue while it represented 5.5% in 1970.

  • The real estate gain on the main residence is not taxed

In Luxembourg, the real estate gain realized by any individual when they sell a real estate that they have for more than 2 years is not taxed 

  • The real estate gain on a real estate investment is low taxed

For a property owned for 2 years minimum, the gain is only taxed the quarter of the global rate. That is to say 10.5% instead of 42% for the global rate. This rate is applicable until the end of the year 2018 and will then increase to 21%. 

  • Some expenses linked to the mortgage are tax deductible

The fees related to the mortgage contract, the administrative fees, the notarial fees… linked to the charges for opening mortgage are fiscally deductible.
The interests of a mortgage are also deductible but limited by a ceiling decreasing with time.  

At Engel & Völkers, we understand the importance of this investment. The knowledge of the real estate market in Luxembourg is an essential input to make a safe and promising investment. Engel & Völkers Luxembourg offers you an expert advice to support you all along your real estate investments.  

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Engel & Völkers
Licence Partner Luxembourg

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