Responding to a parliamentary question from déi Lénk MP David Wagner (PDF), the DP finance minister Pierre Gramegna said: “It will only be then that the government will have all the data necessary related to purchasing buildings, the owners of which benefited from this fiscal measure, and for which owners could have, in a reasonable time, got planning permission to build.”

In 2016, Luxembourg reduced capital gains tax arising on the sale of second homes or investment property to one quarter of the taxpayer’s global tax rate. The measure was introduced to increase the amount of real estate property sold in Luxembourg to encourage the supply of land and homes in Luxembourg and ease the housing shortage.  

Initially, the measure was introduced from 1 July 2016 to 31 December 2017. But the exercise was extended until the end of 2018.

According to Gramegna, the decision to extend the measure by one year was based on an early analysis of the impact. “The number of plots of lands and homes increased by around 9% between 2016 and 2017. Around 1,760 plots of land were sold in 2015 and 2016, respectively, while the administration for registering homes recorded 1,923 land sales in 2017,” he wrote.

Gramegna further explained it was difficult to accurately measure the impact at this stage because of the time it takes to purchase land and obtain planning permission, among other steps in the process. In the best case, this time delay was 15 months, he said.

But, he concluded that based on initial signs, the real estate fiscal measure "should have a net positive effect on the supply of constructible land and homes.”

He also cited the recent IMF delegation which said: “The temporary reduction in the tax on capital gains for real estate sales by end-2018 may nevertheless encourage sales in constructible land.”