The government, employer groups and labour unions during the tripartite talks to tackle inflation and the rising cost of living had adopted a series of measures on housing.
These included raising a tax credit for registration and transaction fees from €20,000 to €30,000 per person, the so-called Bëllegen Akt. Parliament adopted the law on 25 April. It was published last week, putting it into force.
Registration fees amount to 6% of the purchase price of a property with another 1% paid for transaction fees. The tax credit to make up for some of these costs is only available to buyers purchasing a primary residence for themselves. Investors or people buying a secondary or weekend home are excluded.
Every buyer can use the tax credit only once until it is used up. If there is a leftover from an acquisition, this can be carried over if or when the buyer decides to buy and move to another property, for example, when upgrading to a larger home when starting a family.
However, buyers must live in the place they bought for at least two years without interruption and cannot put any part of the property up for rent. In case of violation of these rules, the tax credit must be reimbursed to the state.
For a couple buying a property together, the tax credit under the new rules amounts to €60,000, up by a third compared to the previous regime.
Prices going down
Luxembourg’s real estate market has slowed down with the arrival of high interest rates adding to the financial burden of already high prices.
Although prices rose 9.6% last year overall, the final three months of 2022 saw a drop in prices for the first time in eight years, according to data from statistics office Statec. Purchase prices in the last quarter of 2022 fell 1.4% compared to the preceeding three months of the year.
The number of sales--houses and flats combined--dropped 14.4% in 2022 compared to the year before, with the sales volume falling 10.8% at a value of €3.9bn.
Real estate platform athome.lu confirmed the downward trend in data published at the start of April, saying prices for the first quarter of 2023 were down 5.1% compared to the same time in 2022.
The slowdown in transaction has put the real estate sector under pressure, with the Chambre Immobilère interest group fearing mass layoffs after the government decided not to step in and provide financial support to make up for the shortage of activity.
Other measures from the March tripartite include an increase of the tax-exempt amount on mortgage interest from €2,000 to €3,000. A tax credit to ensure that more of the indexation of salaries ends up in people’s pockets is still pending in parliament.