When relocating to a new country, it is undoubted to say that renting a house or an apartment is one of everyone’s natural choices. However, it is not going to be true anymore when it comes to moving to Luxembourg, it is better to buy a property rather than renting a new one here due to several reasons that are going to be listed below. And these reasons are backed by the fact that 67%, which is quite a high rate, of residents in Luxembourg own their homes.
Limited transaction costs
It is a common thing in Luxembourg when a person purchases a new property, he/she is required to pay a fee amounting to 7% of the price of the property, of which registration fees accounts for 6% and the remaining 1% is for transcription fees. However, the government tries to encourage citizens in Luxembourg and foreign countries to acquire personal property by establishing a policy that offers a reduction between EUR100 and EUR285.714 for a single individual or up to EUR571.428 for a couple, on any first property purchase in the Luxembourg residence area and this factor acts as a tax gift for real estate investors. In details, up to EUR 20000 can be obtained by a single person or a couple can earn as much as EUR 40000, as long as they live in the new residence for more than 2 years . But of course, it is possible to rent out the property after these 2 years to earn extra income, without this tax benefit being called into question.
Property tax is considered to be really low or non-existent
Comparing to other neighboring countries like Germany, Belgium, France and Switzerland, the tax on property in Luxembourg is relativelylow. Therefore, being a property owner, you might not have to suffer from a heavy tax pressure and enjoy your life in this beautiful country instead.
The capital gain which is earned from the sale of the primary residence is non-taxable no matter how high the amount is. This element is quite similar to the policy of some other countries.
Tax-deductible mortgage interest
Purchasing a property everywhere in Luxembourg enables a couple to benefit up to EUR10000 of deductible loan interest and every child they have will account for EUR2000 loan which is tax-deductible added to the amount of EUR10000 annually. Thanks to this tax-deductible policy, the habit of borrowing money to buy property, and renting it out in the end is really appealing to people in Luxembourg and other foreign countries, especially the European ones.
As long as you know that you and your family would stay in Luxembourg for at least 2 years, then buying a property in the country is completely ideal and beneficial.
Luxembourg property market significant growth in recent years and recovery from crises
Experiencing a thriving pace in economy as a European country:
According to World Bank, Luxembourg is holding a strong track record and is forecast to have a 4% annual growth in GDP. Due to this statistic, the economic development of this country is doing really well compared to its neighbors.
Increase in population equals increase in housing demand
World Bank has stated that the annual growth in Luxembourg population is predicted to be 2.2%. With this stable and projected increase in population, the country might experience a rise in the demand for housing as well.
In case of crises, Luxembourg real estate market always implement its resilience
Although Luxembourg experienced a major financial crisis in 2008, its property market was only slightly affected. For more information, after one year of the nation’s crisis, the property prices decreased by 1%. After two years, which was 2010, the real estate prices even increased by 0.5%.
Documents required to purchase a property in Luxembourg
There are no restrictions on the origin of investors buying properties in Luxembourg. Both people from Luxembourg or citizens from foreign countries around the world can acquire property freely in this country. The initial step of buying property in Luxembourg is to make an offer. As soon as the seller has accepted the offer proposed by the buyer, a sales agreement including basic transaction terms is implemented, binding both parties. Furthermore, written contracts are not needed, instead, both parties can agree to cooperate by oral communication. However, to be legally enforceable and enable property protection from third parties, real estate transfers are needed to be registered. Because of the reason that only registered and certified paper will be eligible, the sales must be recorded in a notarial deed. The role of the notary public is to show the deed at the mortgage registry. In the end, you ought to pay registration taxes and other necessary duty costs required by the government.
How to find a property listing in Luxembourg
Newspapers and online property portals are the two most reliable and available sources of information regarding properties in Luxembourg. It is common in this country for properties to be entrusted to a real estate agent in terms of marketing and selling and these processes are mostly done online and through mass media instead of placing “for sale” signs outside the properties’ door. To become a qualified estate agent in Luxembourg, the person is required to either be approved by the Minister des Classes Moyennes or becomea member of Chambre Immobiliere du Grand-Duche de Luxembourg. Liveonriviera.com provides a listing of properties for sale in Luxembourg to ease your accommodation seeking process.
Final notes to transaction costs
The tax for registration is currently charged at 6%, with 1% of transcript tax added. If the contract paper includes a resale term, then the registration tax will be charged at the rate of 7.2%. But in fact, if the resale is implemented within four years, the maximum of up to 5% can be refunded. Besides, another additional 3% surtax is required to be paid for Luxembourg City.
Notary fees account for 1.5% of the value of the property.
This commission is fixed at 3% ( 17% VAT has been added).