2025: The year of Luxembourg's property rebound?

After two difficult years, 2025 could well be the year of recovery for the Luxembourg property market. With tax measures being extended and interest rates expected to fall thanks to the ECB, the signs are multiplying in favour of a revival in activity.

A changing market after a decade of soaring prices

The property market in the Grand Duchy of Luxembourg has been booming for over ten years. Supply struggled to keep pace with steadily rising demand, and historically low interest rates facilitated access to credit. As a result, prices rose at a sustained rate.

However, in 2023, there was a sudden turnaround. The repercussions of the pandemic on the construction sector, the impact of the war in Ukraine on energy costs, and above all the sudden rise in interest rates decided by the European Central Bank (ECB) brought the market to a halt. Trading volumes collapsed, and for the first time in a long time, prices began to fall.

2024: Stabilisation and initial support measures

Faced with this shock, 2024 was a year of transition. The fall in prices slowed, transactions picked up timidly and, above all, the ECB began a policy of monetary easing by gradually lowering its rates.

The Luxembourg government has also introduced measures to support buyers and sellers, notably by extending or strengthening certain tax measures. The aim? To encourage the revival of the sector while supporting home ownership.

2025: A window of opportunity not to be missed?

The start of 2025 brings with it some good news for would-be buyers and investors alike:

• The "Bëllegen Akt" tax credit has been extended until 30 June 2025. This scheme, which reduces registration fees for the purchase of a principal residence, has been increased to €30,000 per individual (i.e. €60,000 for a couple). If you do not take up the entire allowance, the balance can be carried forward to a future purchase. The only condition is that you must occupy the property for at least two years.
• An incentive for rental investment. For VEFA (future construction) purchases, a tax credit of €20,000 per buyer is being maintained to stimulate construction and address the shortage of rental accommodation.
• Accelerated depreciation at 6% for 6 years, with a ceiling of 250,000€ for VEFAs, enabling new owners to benefit from an attractive tax deduction.
• Temporary tax relief for sellers, with capital gains tax halved (from 20% to 10%) until the summer of 2025.
• Tax exemption on transfers of A+ energy class property and on houses transferred to social rental management.
• Registration fees reduced from 7 to 3.5% on existing properties or VEFA for the acquisition of a principal residence and on new housing for investors.

The aim of all these measures is to make the market more fluid by facilitating transactions.

Interest rates: a key factor to watch

The other major lever for recovery is interest rates. After a sharp rise in 2023, the ECB began a cycle of interest rate cuts in December 2024, bringing its key rate down to 3%.

This relaxation could give buyers back their purchasing power and help the property market to recover more strongly.

A strategic time to invest

If 2023 marked a break with the past and 2024 a stabilisation, 2025 could well be the year of the rebound. With more accessible financing and extended support measures, the conditions are ripe for buying a property in a more favourable environment.

But this opportunity could be short-lived. So what if...

📌 If you're planning a property project in 2025, it may be time to take the plunge. Contact LuxKredit as soon as possible to help you on this noble adventure!

 

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