New measures are a boost for the Luxembourg property market

New policies must enable more people to fulfil their dream of home ownership, despite increased house prices and interest rates.

A 40,000-euro tax break. To encourage the purchase of owner-occupied homes, the tax break will be increased from EUR 30,000 to EUR 40,000 per person. “This means you don’t pay registration fees when buying a property of up to 571,000 euros,” says Stevan Stojkovic, CCO of Antonissen Lux. “If you buy a home together with your partner, you both stand to benefit from this tax break, meaning you don’t pay registration fees for a 1,142,000-euro home. This benefit can be used for life and the unused share can even be transferred to any property that is subsequently purchased.”

Interest deduction. Another new support measure is the increased deduction of interest. “From this year, new owner-occupiers will benefit from an annual deduction of 4,000 euros per person, instead of 3,000 euros. The higher interest you pay each month can thus be reclaimed on your tax return. Another signal that the government is mindful of the evolving property market.”

Prioritising affordable housing. High housing prices are making it harder for some people to access the property market in Luxembourg. “Support measures such as the subsidising of interest charges will therefore be extended to a wider target group. The government will also invest 480 million in real estate over the next three years. This should also drive the revival of the construction industry and make housing more affordable. For some types of property, it will be possible to buy just the structure - without the land - which will bring prices down. All this should increase the available housing and create a more inclusive market, for tenants and buyers.”

The Luxembourg government has also enacted measures to facilitate real estate investment and eliminate any reluctance to invest.

A 20,000-euro tax break. Investors who rent out their properties can benefit from a tax break of 20,000 euros per person. For a couple, the tax break rises to 40,000 euros. “This is an interesting measure because, until recently, investors paid registration fees to the amount of 7% of the purchase price for investment properties.”

Accelerated depreciation. Also interesting: the annual percentage charge rate has increased from 5% to 6%. “The depreciation period has also been increased from five to six years. This allows property investors to write off more costs over a longer period of time, easing their tax burden.”

Reduction in capital gains tax. Anyone who sells an investment property owes the taxman capital gains tax. “Usually, this tax amounts to around 20% or half the general rate. This year, the government intends to reduce this to a quarter of the normal rate. The measure is designed to encourage investors with older property portfolios to shift their capital to newbuild properties. This is a support measure for the construction and real estate sectors and helps make the housing market more sustainable.”

Faster and bigger construction projects. Land for development is scarce in Luxembourg. “The population is growing by about 10,000 every year, adding to the pressure on the housing market. Bigger, faster construction projects are needed to provide housing for everyone. The government has already promised to accelerate building permit procedures and encourage densification of residential areas.”

Curious to know what these new measures mean for your specific situation? Are you interested in one of our developments, to live in or as an investment? Contact one of our real estate experts for personal advice with no obligation.