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Renting or buying a property when arriving in Luxembourg?
The answer depends on how long you intend to stay in Luxembourg. If you stay in the country for a short time – less than 5 years-, renting is the best option. Owning your own home in Luxembourg is very expensive and not a very profitable short-term investment such as it is in other countries, even if the Grand Duchy is facing rising pressures on the housing market. It is not coincidence that around half of foreigners rent accommodation in Luxembourg.
Before searching a place to rent or to buy, take a look at the website of the Housing Observatory[1]. Established in 2003 by the Ministry of Housing, this body collects data relating to the housing market and analyses the supply of housing and accommodation prices throughout the year. And while you are browsing property listings, make sure you check the energy performance certificate. This mandatory document, that the owner must have drawn by experts, provides useful information on the calculated energy needs of the housing.
Finding a rental property
Most rental properties in Luxembourg are marketed through real estate agencies and homes to rent can be found on property portals, at agency websites and in local newspapers. In the Grand Duchy, and especially in the capital, a few owners rent out their properties themselves. The majority of them prefer to entrust this task to a real estate agency, which earns a commission for each transaction (usually the first month’s rent plus 17% VAT). Using a real estate agency can be helpful in some situations such as a refusal of the landlord to sign a contract – a vital step to protect yourself – or if you are not completely comfortable with the language the contract is in. Rental contracts are usually for one, two or three years. Before you move in, you also have to pay a rental deposit (equivalent to 1-3 months’ rent) into the owner’s account or into the bank in the form of a blocked account in your name. The second option is preferable. In order to better understand your rights and obligations as a tenant, you can refer to the website of the Consumers’ Union (Union luxembourgeoise des Consommateurs)[2].
Most houses and apartments are unfurnished and usually have a fully equipped kitchen, including cooker and oven. When visiting a property, it is recommended to check with the landlord or the agency what furnishings are provided and make sure this is included in the contract. For very short-term stays such as six months to a year, a few furnished properties are available.
Flat-sharing can be an interesting alternative if you want to limit your accommodation costs. Websites such as www.appartager.lu list advertisements (including photos) posted by people offering or searching for a room in apartments and houses in Luxembourg.
Becoming a homeowner
If you intend to stay in Luxembourg for more than 5 years, you might consider buying property in Luxembourg, although renting is typically advised first to know the area. Taxes related to home ownership are favourable in Luxembourg. Thanks to the Bëllegen Akt, a tax credit introduced by the Government in order to reduce the incidental expenses associated with the purchase of a dwelling, transaction costs are limited. Registration and transcript fees are reduced to € 100 for any purchase up to € 285,714 for a single person or € 571,428 for a couple (7% of the price of the property above this threshold). Mortgage interests are tax-deductible and the property tax is very low, in comparison to other neighbouring countries. And when you come to sell, there will be less tax to pay on the realized capital gain if you have owned the property for at least two years.
There are a range of loans and grants available for homebuyers in Luxembourg. Your entitlement largely depends on your personal circumstances. To see if you are eligible, the best thing to do is to contact the Housing Assistance Department[3]. If it is hard for you to get a mortgage, it may be possible to get help in the form a State guarantee. If you meet particular conditions, the State assume a part of the guarantee for your mortgage housing loan. You can find more information about the State guarantee and application forms on the Government website[4].
Like rental properties, properties for sale are generally listed in newspapers, online property portals and agency websites. Another option is to visit the site www.notariat.lu where you can find the list of public auctions of real estate conducted by notaries. The website is also useful if you are looking for a notary. A notary is required to administer all property transactions. Notary fees are fixed by law and tend to be around 1,5% of the property’s value.
Finally, take into account that once you agree to purchase a property, you’ll need to pay a deposit. How much deposit you pay will depend on the mortgage deal you have secured, but it is common to pay a deposit of up to 25%.
[1] observatoire.liser.lu – in French
[2] https://www.ulc.lu/fr - in French and German
[3] Service des Aides au Logement – Tel: (+352) 247-84860 – Mail : info@ml.etat.lu
[4] https://guichet.public.lu/en/citoyens/logement/aides/aides-directes-capital/garantie-etat.html
12/2021
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War in Ukraine, the economic slowdown, soaring inflation: in these uncertain times, it's not always easy to make the right decisions, especially when they concern home loans. What should you look out for if you want to become a homeowner or if you still have a loan to repay?
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Renting or buying a property when arriving in Luxembourg?
The answer depends on how long you intend to stay in Luxembourg. If you stay in the country for a short time – less than 5 years-, renting is the best option. Owning your own home in Luxembourg is very expensive and not a very profitable short-term investment such as it is in other countries, even if the Grand Duchy is facing rising pressures on the housing market.
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Is insurance for the remaining balance due compulsory?
Accurately quantifying the cost of insurance for the remaining balance due is difficult, because in practice it is calculated on a case-by-case basis. It depends on your loan. The higher your capital to insure, the higher the premium will be.