An international financial center with a huge appeal, Luxembourg and its 600,000 inhabitants is home to nearly 170 different nationalities. A melting pot that grows at the rate of 12,000 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".
According to the Observatoire de l'Habitat, between 2016 and 2017, the purchase price of old apartments rose by 4.7%. Over the same period, the pricing for new housing increased by 6.1%. This inflation did not dampen overall buyer enthusiasm. The number of transactions registered surged by 12% for purchases of existing flats.
The Observatoire estimates that in the Canton of Luxembourg, the average purchase price of a house is 968,918 euros. That's twice as much as in the north of the country.
New constructions have a much higher asking price than their ‘old’ counterparts. For a new flat, you can expect to spend 7,000 euros per m2 in the center of Luxembourg City, while an existing apartment is trading at 5,000 euros per m2. Although, according to the real estate agent, this price gap is beginning to fade.
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.
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.”
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.
According to the real estate agent, "in principle everyone can access the purchase of property" provided they can demonstrate the origin of funds to avoid money laundering problems. They also note that, "a personal contribution of about 20% of the purchase price is often requested”. You will also have to take out an insurance policy for your property, "otherwise the bank may not give their green light".
For the property search, the following agency websites Wortimmo.lu, Athome.lu or Immotop.lu are favored by sellers. In fact, according to the official portal of the Grand Duchy of Luxembourg, few owners manage the sales process of their property themselves. The overwhelming majority of them use an agency to manage visits and administrative procedures.
Once the property of your dreams is found, you will have to appoint a notary to perform the deed of sale after the signing of the agreement. To find the one that will protect your interests, visit the notaries’ website in Luxembourg.
Finally, if you have recently arrived in the Grand Duchy, do not forget that you must first declare yourself a Luxembourg resident before you can buy a property.