Becoming a homeowner in Luxembourg: what you should know before taking the leap

Real estate in Luxembourg, a rapidly growing market

An international financial center with a huge appeal, Luxembourg and its 660,000 inhabitants is home to nearly 170 different nationalities. A melting pot that grows at the rate of 15,000 new residents each year.

The high level of earnings of these new residents tends to push real estate prices up in the Grand Duchy. "We are building 4000 new homes a year, where we actually need 6000" to support the increase in the number of residents, says the Luxembourg daily newspaper L'Essentiel.

A view shared by Jean-Francois Zimmer, a real estate agent in Luxembourg: "It has created considerable real estate pressure that has caused prices to double in the span of a few years".

Despite rising mortgage rates and a slight fall in market prices in 2023, the property market in Luxembourg remains tight.

A house for over a million

The Observatoire estimates that in the Canton of Luxembourg, the average purchase price of a house is around 1,594,711 euros. That’s twice as much as in the north of the country.

For a new apartment, you can expect to spend 10,402 euros per square meter in the Canton of Luxembourg.

To keep on top of the evolution of real estate market prices, the Observatoire de l'Habitat website is a most valuable partner. Finally, remember that the final sale price of the property will also include the real estate agency commission and notary fees.

The prospect of a real estate bubble

As close observers of this surge in property prices, some Luxembourg dailies evoke the risk of a "real estate bubble". For the real estate agent, Luxembourg has not yet reached this point. "We have not reached the same real estate price points as London or New York. Moreover, in Luxembourg there are many wealthy people who can afford to buy at these prices.”

Tax incentives

When buying your house or flat, you can benefit from a tax abatement, also known as tax credit, of up to 20,000 euros.

But the incentives that encourage ownership do not stop there. In Luxembourg, transaction costs are limited, the property tax is extremely low, the capital gain is not taxable on resale and interest on mortgages is tax deductible. Add the tax credit on notarial deeds or mortgage insurance. Strong arguments that end up convincing buyers even in a rising real estate market.

How to buy in Luxembourg? The steps to get started

Making a property project a reality in the Grand Duchy requires following a process structured around key stages. The first step is to define your budget precisely by assessing your borrowing capacity. Next comes the active property search, followed by the signing of the preliminary sales agreement. This document constitutes a firm legal commitment between the buyer and the seller; it generally includes crucial conditions precedent, in particular obtaining your bank financing.
Once the preliminary sales agreement has been signed, the timeframe for finalising the purchase and signing the notarial deed varies depending on the complexity of the application (approval of the loan by the bank, fulfilment of the conditions) and remains set by mutual agreement in the preliminary sales agreement itself. This is when the notary steps in to ensure the legal security of the transaction by carrying out all the necessary mortgage and administrative checks before preparing the authentic deed. Finally, when taking out your mortgage loan, you should be aware that financial institutions almost systematically require outstanding balance insurance. This essential cover protects your loved ones and guarantees repayment of the outstanding capital in the event of hardship.

What conditions must be met to become a homeowner in Luxembourg? 

Access to home ownership in the Grand Duchy is subject to strict financial and administrative criteria. First and foremost, it is necessary to demonstrate sufficient borrowing capacity. Banks analyse the stability of your income, your
overall debt ratio and most often require a personal contribution to cover at least the ancillary costs. These costs, which must be factored into your financing plan, include bank fees, notary fees and registration duties. The intervention of a notary is also a legal requirement to authenticate the deed of sale. Note that, depending on your personal situation (resident or newcomer, household composition and the nature of the property), several government aid or tax relief schemes (such as the Bëllegen Akt) may apply. Remember to check your eligibility on Guichet.lu before finalising your project.
 

Buying a house or an apartment: what are the differences?
 

Choosing between buying a single-family house or an apartment in co-ownership greatly influences your day-to-day life and long-term finances. Buying a house offers complete independence and the enjoyment of private land, but means that all maintenance (façade, roof, garden) rests entirely on your shoulders. In an apartment, you are subject to building regulations and to the collective decisions of the general meeting, while also having to pay monthly co-ownership charges for the maintenance of common areas. These structural differences directly affect your annual budget as well as the cost of your home insurance. In addition, the attractiveness and resale potential vary depending on the geographical location of the property in Luxembourg. AXA therefore encourages you to compare the overall running costs over several years, not just the initial purchase price.