Article | Intelligent Investment

Why continue to invest in Luxembourg residential real estate in 2023?

The various crises of recent years, including Covid-19, the war in Ukraine, and the current inflationary period, have created some uncertainties and had some impact on the residential real estate market. Even so, investing in residential real estate remains a safe and attractive investment, and let's see why.

May 8, 2023 7 Minute Read

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A resilient real estate market 

There has been a slowdown in the increase in sale prices since the second half of 2022, and at the same time, a faster increase in rent levels. This increase is particularly due to a decrease in the number of potential buyers caused in part by the rise in mortgage interest rates. 

Sales prices increasing at a slower pace combined with a slightly reduced number of buyers may indicate that this is a good time to invest. 

Considering that Luxembourg has experienced a continuous increase in residents (+9,000 new residents on average between 2018 and 2022), the residential real estate market remains a promising market that will soon find a new balance. 

This constant and growing demand plays a significant role in the robustness and resilience of the real estate market.

Undeniable tax advantages 

There are a number of tax advantages for buyers when purchasing their main residence in Luxembourg:

  • A tax deduction or tax credit, limited to €20,000 per person or €40,000 for a couple. 
  • A low property tax
  • A reduced VAT rate from 16% to 3% for construction or renovation works (up to €50,000).
  • A tax-free capital gain when reselling the property (subject to certain conditions proving that the property was the main residence).
  • A tax deduction of the mortgage interests in the tax return (2.000€ /persons living within the household during the first 5 years)  

Furthermore, acquiring a property for rental investment also has a number of advantages. Owners of rental properties can benefit from deductibility of expenses and interests related to the property, such as maintenance and repair costs, rental management fees, insurance premiums or property tax, as well as accelerated fiscal depreciation of the cost of the property, or attractive taxation on the capital gain when selling the property.

An investment for the future

Investing in residential real estate today is an assurance that your property will be rented quickly at an attractive market rent. It also ensures that you will acquire an estate for the future, which, in the long term, will be useful, for instance, at the end of your professional career when you retire, in order to ensure a certain income thanks to the rents collected or to the capital gain realized at the time of a resale, which can also be reinvested in another property. This real estate asset can also be passed on to descendants. 

All of these possibilities and advantages make residential or rental real estate investment still attractive in Luxembourg in 2023. If you have a real estate investment project in mind, our Residential experts are at your disposal.

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