Real estate: the end of subsidies - what will change in 2025?

The Luxembourg government has just announced a major change for the property sector: the temporary tax measures introduced to support the market will not be maintained. However, some forms of assistance will be extended. Here's everything you need to know:

Growth picking up in the property market

In his State of the Nation Address, Prime Minister Luc Frieden was very clear: The Luxembourg property market recovered in 2025, and there is no longer any need to subsidise it to the same extent.

According to the Prime Minister, after a recession in 2022 and 2023 :

• transactions for existing homes have doubled over the past year
• sales of new homes have quadrupled over the same period.

This positive dynamic is also reflected in the home loans sector, with a significant increase in the number of loans granted.

"The housing market has regained momentum. That was our objective. Tangible progress, both for people looking for a home and for professionals in the building and craft industries.

Luc Frieden, Prime Minister of Luxembourg

At the same time, the economic indicators are in the green: Luxembourg's growth forecast is 2.5% in 2025 according to the STATEC.

Clearly, for the government, the measures to support the property market have borne fruit. So it's time to end them.

Measures ending in 2025

The Luxembourg government has clearly announced its decision to not to extend the temporary tax arrangements implemented during the crisis in the property sector.

In concrete terms, the exceptional tax measures that are due to expire include :

• The temporary tax incentives for investors in residential property (accelerated depreciation at 6% and reduction in capital gains tax to a quarter of the overall rate)
• The specific tax breaks granted to developers and builders to stimulate the supply of new homes

The exact timetable for the end of these schemes was not specified in the speech, but according to the information available, these temporary measures will not be extended beyond their scheduled expiry date (30 June 2025).

Professionals in the sector and private individuals concerned therefore need to think ahead a return to standard tax conditions from 1 July 2025.

Continued support for home ownership

While the Luxembourg government is putting an end to the exceptional tax measures, it is nevertheless maintaining an essential scheme for future homeowners: the tax credit for notarised deeds, commonly known as the "notarised deeds tax credit". bëllegen Akt" .

This aid, which initially amounted to €30,000 per buyer, was increased to €40,000 in 2024. It is designed to reimburse the registration fees charged by the State up to a certain amount. It applies only to the purchase of a principal residence.

"The tax credit on notarial deeds (bëllegen Akt) for home ownership, amounting to €40,000, will be maintained. This means that a couple buying a home for their own use worth around €1 million will not have to pay any registration fees.

Luc Frieden, Prime Minister of Luxembourg

This decision has a clear objective: continue to support home ownership.

New measures to boost construction

Over and above the question of direct aid, the Luxembourg government is banking on an in-depth overhaul of administrative procedures to stimulate housing construction.

"We are committed to building more, faster. To achieve this, we have launched a real paradigm shift in procedures".

Luc Frieden, Prime Minister of Luxembourg

Measures already presented to the Chamber of Deputies in January 2025 include:

• The principle of "Natur auf Zeit (temporary nature), which allows certain areas of land to be temporarily returned to nature before being developed further
• The principle of "compensation once and for allwhich simplifies environmental compensation measures for construction projects.

These reforms aim to strike a better balance between housing needs and environmental protection, two imperatives that are sometimes perceived as contradictory.

A number of other important measures will also be presented in the coming months:

• La second phase of "silence means agreementwhich will make it possible to speed up administrative procedures by taking the view that the administration's failure to respond within a set period of time is tantamount to approval.
• A new building by-lawharmonising building regulations at national level
• La simplification of the PAG (Plan d'Aménagement Général) and PAP (Plan d'Aménagement Particulier) procedureswhich govern town planning at municipal level

Another important lever announced by the government concerns the mobilising undeveloped building land (a subject that has been around for several years). The Prime Minister indicated that "the Government will also present its proposals for the mobilisation tax on undeveloped land in building zones by the summer".

This tax is designed to encourage owners of building land to develop it or put it on the market, rather than keeping it as a land reserve. Given the potential impact of such a measure, industry professionals have high expectations.

The impact of such measures on the Luxembourg market

The impact on your property purchase

• For first-time buyersThe fact that the €40,000 "bëllegen Akt" (which was supposed to be temporary) has been maintained is excellent news. A couple buying their first principal residence will therefore continue to benefit from a significant exemption from registration fees (no registration fees up to €1 million).
• For investors and buyers of top-of-the-range propertiesThe end of the exceptional tax measures could represent an additional cost. These buyer profiles, who were able to benefit from temporary tax advantages during the crisis period, will now have to deal with a standard tax framework that is potentially less favourable.

And so, first-time buyers and buyers of primary residences will continue to receive particular support from the government in 2025.

Impact on the property market

As far as the Luxembourg market is concerned, experts are predicting mixed effects:

• In the short term The end of the exceptional support for investors (some investors may turn to other types of investment) could result in prices holding steady or falling slightly.
• In the medium term structural reforms aimed at speeding up procedures and mobilising building land should encourage an increase in supply, thereby helping to gradually stabilise prices
• In the long term The combined effect of greater housing production and more effective regulation should (in theory) lead to a more balanced market that is less sensitive to the various crises (remember that the Luxembourg property market was the most affected by the crisis of 2022).

The banks are cautiously optimistic. "Indicators of demand for mortgages have been positive for several months now, and we're still waiting to see what happens. we do not expect any major impact from these policy changes. We expect the gradual fall in interest rates to partly offset the end of the exceptional tax arrangements," says an analyst at a leading local bank.

With interest rates and prices still high, pressure could increase on the rental market, with ever more expensive rents in Luxembourg.