After two difficult years, 2025 could well be the year the Luxembourg property market recovers. Between the extension of tax measures and the fall in interest rates expected thanks to the ECB, the signals in favour of renewed activity are multiplying.
A market in transition after a decade of soaring prices
The Grand Duchy’s property market saw spectacular growth for more than ten years. Supply struggled to keep up with steadily rising demand, and historically low rates made credit easy to obtain. The result: prices climbed at a sustained pace.
In 2023, however, there was an abrupt reversal. The effects of the pandemic on the construction sector, the impact of the war in Ukraine on energy costs, but above all the sudden rise in interest rates decided by the European Central Bank (ECB), brought the market to a halt. Transaction volumes collapsed and, for the first time in a long while, prices began to fall.
2024: stabilisation and the first support measures
Faced with that shock, 2024 was a year of transition. The fall in prices slowed, transactions picked up tentatively and, above all, the ECB began a policy of monetary easing by gradually lowering its rates.
The Luxembourg government also introduced measures to support buyers and sellers, notably by extending or strengthening certain tax schemes. The aim? To help the sector recover while supporting access to home ownership.
2025: a window not to be missed?
The start of 2025 brings several pieces of good news for buyers and investors alike:
- The “Bëllegen Akt” tax credit extended until 30 June 2025. This scheme, which reduces the registration duties on the purchase of a main residence, is raised to €30,000 per individual (i.e. €60,000 for a couple). Where the allowance is not used in full, the balance can be carried over to a future purchase. The only condition: occupying the property for at least two years.
- An incentive for buy-to-let investment. For off-plan purchases (VEFA), a tax credit of €20,000 per buyer is maintained in order to stimulate construction and address the shortage of rental housing.
- Accelerated depreciation of 6% over 6 years, capped at €250,000 for off-plan purchases, allowing new owners to benefit from an advantageous tax deduction.
- Temporarily relaxed taxation for sellers, with capital gains tax halved (10% instead of 20%) until the summer of 2025.
- Tax exemption on transfers of energy class A+ properties and on homes transferred to social rental management.
- Reduced registration duties, from 7% to 3.5%, on existing or off-plan properties for the purchase of a main residence and on new-build homes for investors.
All these measures are intended to get the market moving by making transactions easier.
Interest rates: a key factor to watch
The other major lever for recovery rests on how interest rates evolve. After the abrupt rise in 2023, the ECB began a cycle of cuts from December 2024, with its key rate brought back to 3%.
An easing that could restore purchasing power to buyers and drive a more marked restart of the property market.
A strategic moment to invest
If 2023 marked a break and 2024 a stabilisation, 2025 could well be the year of the rebound. Between more accessible financing and extended support measures, the conditions are in place to consider buying property in a more favourable setting.
But the opportunity may be short-lived. So if…
📌 you are considering a property project in 2025, now may be the time to take the plunge. Contact LuxKredit as soon as possible so that we can stand beside you on this fine adventure!
