Published on and written by Cyril Jarnias
Navigating the real estate market can be complex, especially when choosing between settling in Luxembourg or one of its neighboring countries. Given notable differences in price per square meter, tax regulations, and economic outlooks, this detailed comparison provides essential insights for potential investors.
By examining various factors such as quality of life, mortgage accessibility, and growth opportunities, this article aims to highlight the specific characteristics and opportunities of each real estate market. Whether maximizing investment profitability or settling in a favorable environment, this comparative analysis will help make an informed decision.
Real Estate Market Study in Luxembourg and Neighboring Countries
Real Estate Market in Luxembourg (2025):
- Average Prices per Square Meter:
| Property Type | Average Price (€/m²) |
| Older Apartment | 7,636 to 7,790 |
| Older House | ≈5,905 |
| New Apartment (VEFA) | ≈10,289 |
Regional Price Variations
The center remains the most expensive area in the country, with peaks reaching up to €11,095/m² in Luxembourg Canton. The northern and eastern regions remain significantly more affordable, around €5,800–6,900/m².
Recent Trends
- After two years of correction, prices are slightly rising again (+3.5% for older houses in early 2025).
- Demand remains particularly strong in the center and south of the country.
- The rental market is also experiencing continuous growth: in July 2025, renting in Luxembourg Canton costs an average of €32.91/m²/month.
Factors Influencing Prices in Luxembourg
- Recent decrease in interest rates
- Extension of tax benefits for property purchases
- Limited supply facing high demand due to population growth
- Contrasting dynamics between older properties (moderate recovery) and new apartments (very high prices but smaller sizes)
| Country | Average New m² Price (€) | Average Older m² Price (€) | Comments |
| Luxembourg | ≈10,300 | ≈7,700 | Limited offers; strong pressure on new supply; favorable taxation but high costs. |
| Belgium | ≈3,600–4,500* | ≈2,800–3,200* | Stable market; Brussels more expensive than Wallonia/Flanders; significant registration fees. |
| France | Paris: >10,000; Province:≈4,500* | Paris: >11,000; Province:≈3,700* | Heterogeneous dynamics: Paris very expensive/stable; affordable regions. Heavy taxation (ISF/IFI), variable homeownership assistance depending on zones. |
| Germany | ≈4,500–8,000 major cities* | ≈2,800–6,000 major cities* | Robust market but less speculative than Lux/France; moderate acquisition fees (Grunderwerbsteuer). |
*(indicative values Q1-Q2/2025 according to national barometers)*
Types of Properties Available by Market
- Luxembourg: Predominance of recent or under-construction apartments in the center/south; single-family homes mainly outside urban areas.
- Belgium: High proportion of individual houses except in urban centers.
- France: Great diversity – older/new urban apartments vs. suburban/rural houses.
- Germany: Mostly collective housing in cities; single-family homes in suburbs.
Tax Policies & Legislation Impacting Real Estate
Luxembourg:
- Reduced VAT on new homes under conditions
- “Bëllegen Akt” tax credit easing notary fees for first-time buyers
Belgium:
- High registration fees (12.5% Wallonia-Brussels)
- Possible exemptions for primary residence
France:
- Notary fees/transfer taxes approx. 7% for older homes
- IFI taxing high real estate wealth
- Subsidized loans/anah/incentive taxation in tight zones
Germany:
- Variable acquisition tax depending on Land (approx. ~6%)
- No real estate wealth tax
- Strengthened rent control in major cities (“Mietpreisbremse”)
Economic Outlook & Expected Impacts on Regional Investment
List of key trends:
- Gradual recovery expected in Lux due to low rates and extended tax measures
- Belgium: overall stability despite European economic slowdown
- France: caution regarding potential rate increases/reduced credit
- Germany: market still solid but susceptible to local corrections if inflation persists
Real estate investors still favor the Grand Duchy despite its record costs due to its political-economic stability and attractive regulated taxation — while neighboring markets offer more volume/price opportunities but sometimes less profitable or more exposed to European macroeconomic variations.
Thus, the Grand Duchy remains a premium real estate hub in Western Europe with difficult but secure access — while its neighbors offer easier access against potentially lower or more fluctuating returns depending on national conditions
Good to Know:
In Luxembourg, real estate prices average €11,000 per square meter, partly due to high demand, limited supply, and a thriving economy, but also favorable tax policies that attract many investors. In Belgium, the average price per square meter is €3,000, where the market is more stable with diverse supply, although tax laws are less attractive to foreign investors. In France, particularly near the Luxembourg border, prices hover around €4,000, influenced by strong cross-border demand and strict rental regulations. In Germany, prices vary significantly by region, but on average the square meter costs about €4,500, supported by a strong economy and purchase-incentive laws. Future investments may be influenced by ongoing tax reforms, potential economic slowdowns, and state green initiatives, making it crucial to closely monitor each country’s policies.
Analysis of Real Estate Taxation in Luxembourg Compared to Neighboring Countries
Tax Regime Applicable to Real Estate Property in Luxembourg
Luxembourg stands out with an attractive tax regime for real estate investment, featuring several incentive measures and moderate charges compared to its neighbors.
Property Tax and Registration Fees
- Property Tax: Relatively low, it remains marginal in the overall burden for owners.
- Registration Fees: 6% of the property value (or 7.2% if purchased for resale), plus 1% transcription fee. For acquisitions between October 1, 2024, and June 30, 2025, a 50% reduction in the taxable base applies for purchasing residential properties, thus lowering the overall cost to 3.5%.
Real Estate Capital Gains Tax
- Capital gains on the sale of a property held for less than 2 years are taxed as ordinary income.
- For properties held for more than 2 years, a specific tax applies: until June 30, 2025, the capital gains tax rate is reduced to 10% instead of 20%.
- Full exemption for the sale of the primary residence.
Tax Deductions and Benefits
- “Bëllegen Akt” Tax Credit: Up to €40,000 per person for purchasing a primary residence.
- Rental Tax Credit: Up to €20,000 per person for new homes intended for rental.
- Accelerated Depreciation: 6% per year for 6 years on properties acquired in VEFA (sale in future state of completion).
- Reduction in Registration Fees: From 7% to 3.5% for purchasing a primary residence.
- Exemption or Reduction of Capital Gains when reinvesting in social rental management or for highly energy-efficient buildings (A+ level).
Summary of Key Tax Measures (Luxembourg, 2025)
| Measure | Amount or Rate | Main Condition |
|---|---|---|
| Property Tax | Low (varies locally) | Real estate ownership |
| Registration Fees | 6% (3.5% if reduced) | Purchase of primary residence |
| Transcription Fee | 1% | On all acquisitions |
| “Bëllegen Akt” Tax Credit | Up to €40,000 | Purchase of primary residence |
| Rental Tax Credit | Up to €20,000 | New home intended for rental |
| Accelerated Depreciation | 6%/year for 6 years | VEFA |
| Real Estate Capital Gains | 10% (instead of 20%) | Held > 2 years, excluding primary residence |
Comparison with Neighboring Countries
| Aspect | Luxembourg | France | Belgium | Germany |
|---|---|---|---|---|
| Property Tax | Low, low impact | High, depends on municipality | Moderate, depends on region | Variable, sometimes high |
| Registration Fees | 6% (3.5% if reduced) + 1% | 5–6% + notary fees | 12.5% (Brussels region) | 3.5–6.5% depending on Länder |
| Purchase Tax Credit | Up to €40,000 | None | None | None |
| Tax Depreciation | 6%/year (VEFA) | No (residential) | No (residential) | Yes (rental investment) |
| Real Estate Capital Gains | 10% (excluding primary residence) | 19% + social contributions | Complex taxation, exemption after 5 years | 25% (excluding primary residence) |
| Primary Residence Exemption | Yes | Yes (after 22 years) | Yes (after 5 years) | Yes (after 2 years of ownership) |
Concrete Examples
- Purchase of a Primary Residence in Luxembourg: A couple benefits from a total tax credit of €80,000 and pays reduced registration fees of 3.5% on the remaining price.
- Sale of a Property Held Over 2 Years: Taxation on capital gains at 10%, except full exemption for primary residence.
Economic Impacts and Cross-Border Investment Decisions
Luxembourg: Tax incentives support demand, limit entry costs, and favor residential mobility. The advantageous regime attracts foreign investors, especially those seeking to optimize capital gains and acquisition fee taxation.
France and Belgium: High acquisition taxes and capital gains taxation are more dissuasive for short or medium-term investments, encouraging long-term investment or primary residence purchases instead.
Germany: Moderate acquisition taxation and the existence of tax depreciation make rental investment attractive, but capital gains taxation remains higher than in Luxembourg for non-residents.
Impact Analysis
Tax differences partly explain the dynamism of the Luxembourg market, particularly in the rental segment and for primary residences.
Cross-border investors often favor Luxembourg for its legal security, advantageous taxation, and purchase support measures.
Heavier charges in France and Belgium hinder investor mobility and limit access to property for first-time buyers.
Key Elements for Potential Buyers to Consider
- Temporary Tax Benefits in Luxembourg (until June 30, 2025) for acquisition and rental management.
- Low Capital Gains Taxation and exemption for primary residence.
- Reduced Entry Taxation thanks to tax credits and reduced registration fees.
- Compared to Neighboring Countries, Luxembourg offers a more favorable environment for real estate investment, both in acquisition and resale, especially for residents and long-term investors.
In Summary: Luxembourg offers a highly competitive tax framework for real estate investment, with incentive measures and moderate taxation, strongly contrasting with the heavier charges and limited incentives observed in France, Belgium, and Germany. These differences notably influence the structure and dynamics of the local and cross-border real estate market.
Good to Know:
In Luxembourg, real estate taxation proves relatively favorable with a property tax reduced compared to neighbors like France or Belgium, where it is higher. Real estate capital gains are taxed at a variable rate, but often advantageous after a certain holding period. Tax deductions, particularly on loan interest or for certain renovations, also constitute an advantage for investors. For comparison, France offers capital gains exemptions based on holding duration, while Germany applies an exemption after ten years. Real estate properties in Luxembourg do not benefit from the same primary residence exemptions as in these neighboring countries, which can influence the weight of tax charges on residents. Differences in tax burden and incentives can thus guide investment decisions, with Luxembourg often representing an attractive market due to fiscal stability, but with a high acquisition cost. For potential buyers, it is crucial to weigh the exemptions and tax rates of different countries to maximize their real estate investment in a cross-border context.
Advantages and Disadvantages of Investing in Real Estate in Luxembourg
Main Advantages of Real Estate Investment in Luxembourg:
- Economic and Political Stability: Luxembourg stands out with a robust economy, one of the highest GDPs per capita globally, and a stable political environment, offering a secure framework for investors.
- Advantageous Taxation: Several tax measures make investment attractive:
- Reduced VAT at 3% on purchase of new homes for primary residence (up to €50,000)
- “Bëllegen Akt” and “investor” tax credits
- Accelerated depreciation for certain property types
- Extension of incentive tax measures until July 2025
- Growing Housing Demand:
- Dynamic market driven by strong demand, notably due to population growth and the country’s attractiveness for expatriates and cross-border workers
- Structural housing shortage, supporting prices and rental profitability
- Favorable Financing Conditions:
- Trend of decreasing interest rates since 2024, facilitating access to mortgage credit
- Government response to the housing crisis with a record budget to support supply
- Easy Access to Financial Institutions:
- International financial center, offering a wide range of financing products and experienced banking partners
- High Quality of Life: Secure environment, high-level education and healthcare, international attractiveness
Potential Disadvantages to Consider:
- High Real Estate Prices:
- Luxembourg ranks among the most expensive markets in Western Europe, limiting accessibility for many investors or first-time buyers
- Increased Competition:
- Strong demand, scarce supply, and interest from institutional investors create sustained competition, especially for quality or well-located properties
- Strict Regulations:
- Demanding legal framework, very high energy standards (AAA or AAA+ homes), complex acquisition procedures
- Risk of Real Estate Bubble:
- Continuous price increases and market speculation regularly fuel fears of a sharp correction, although no consensus exists on an imminent bubble
Comparison with Real Estate Markets in Neighboring Countries:
| Criterion | Luxembourg | Belgium | France | Germany |
|---|---|---|---|---|
| Economic Stability | Very High | Good | Good | Very High |
| Real Estate Taxation | Advantageous (reduced VAT, tax credits, tax treaties) | Moderate (high registration fees) | Heavy (IFI, high transfer taxes) | Variable by Länder |
| Real Estate Prices | Very High | More Affordable | Variable (Paris very high) | Variable (Berlin affordable, Munich high) |
| Housing Demand | Strong and Structural | Strong in border cities | Strong in tight zones | Strong in major cities |
| Financing Conditions | Flexible Financial Center | Conventional Banking Market | Conventional Banking Market | Diverse Banking Offer |
| Regulations | Very Strict, High Standards | Strict, but less than Luxembourg | Heavy Regulations (ALUR law, DPE) | High Energy Standards |
| Real Estate Bubble Risk | Moderate to High (according to some analysts) | Moderate (slower growth) | Localized (tight zones) | Present in some cities |
Recent Data and Studies:
- Mortgage interest rates in 2024: around 4%, but trending downward in 2025, reviving demand and real estate transactions
- Gross rental yield in Luxembourg: between 3% and 4% depending on sectors
- Public budget for affordable housing in 2025: €505 million
- Transition period until July 2025 to benefit from advantageous tax measures
Key Takeaways:
Luxembourg offers a stable and fiscally advantageous environment, but real estate investment there requires rigorous market analysis, good financial preparation, and vigilance regarding high prices and increased competition. Current conditions (low rates, temporary tax incentives) make the timing particularly favorable for informed investors.
Compared to its neighbors, Luxembourg stands out for its high prices, attractive taxation, and demanding regulatory framework, but sustained demand and scarce supply ensure a certain market resilience.
Good to Know:
Investing in real estate in Luxembourg presents significant advantages such as robust economic stability and attractive taxation, which are notable assets compared to some neighboring countries. Housing demand is constantly increasing due to a growing and diverse population, thus facilitating the appreciation of purchased properties. Moreover, access to numerous financial institutions in the country makes investment financing relatively accessible, unlike some neighboring markets where credit access may be more restrictive. However, the Luxembourg real estate market is characterized by high prices and increased competition, often exceeding averages in neighboring regions like Belgium or Germany. Strict regulations can also complicate administrative procedures for foreign investors, a similar challenge encountered in France. Furthermore, price pressure raises the risk of a real estate bubble, a concern less felt in some peripheral cities outside Luxembourg. Recent studies highlight these disparities and advise potential investors to consider these elements before proceeding, particularly comparing with the less fluctuating and more predictable conditions of neighboring markets.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
