Real Estate in Luxembourg: Between new build slowdown and fragile recovery

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Real Estate in Luxembourg: Between new build slowdown and fragile recovery

As the market remains under pressure, the Luxembourg government is shifting its approach: reducing general subsidies while maintaining targeted support for homebuyers. In this context, the existing property market plays a growing stabilizing role, while the new build sector continues to struggle.

🎯 Tax Incentives Ending – But “Bëllegen Akt” Remains

Speaking before Parliament, Prime Minister Luc Frieden confirmed that the state would not continue to support the housing market indefinitely. The temporary tax relief measures introduced in 2023 to reduce acquisition costs will expire on June 30, 2025. One key measure remains: the “Bëllegen Akt” tax credit, which provides up to €40,000 in notary fee reductions. It continues to benefit especially young households looking to buy existing properties — a simple, effective, and still popular form of support.

🧱 New Construction Under Pressure: Fewer Sales, Limited Momentum

Despite positive economic forecasts for 2025, the new construction sector remains in distress. According to the Chamber of Skilled Trades, business activity remained negative in Q1, with a balance of -15. The industry lost 4,600 jobs in 2024, and VEFA (pre-construction sales) remain well below pre-2020 levels. Since 2022, over 5,000 fewer units have been sold compared to the 2014–2020 average. Although there was a small rebound at the end of 2024, the outlook remains uncertain.

🏢 Public Sector Demand Supports a Fragile Market

With private demand still too weak to revive the market, the public sector has become the main driver of activity. Over 35% of recent sales were conducted by or on behalf of the State, the Housing Fund, or the City of Luxembourg. The Housing Fund, which focuses on affordable housing, reported no construction halts, and plans to deliver 1,300 new affordable homes by 2029. This institutional support limits the downturn, but cannot alone restore balance to the market.

🧭 A Fragile Stabilization: Professionals Urge Adjustments

Industry voices remain cautious. Michel Reckinger, president of the UEL, acknowledged that “the market has likely hit bottom,” but a real recovery is not yet underway. He suggested a technical adjustment: eligibility for tax benefits should be based on the date of the sales agreement (compromis de vente) rather than the notarial act, to account for current delays with notaries. Meanwhile, the Chamber of Skilled Trades warned that the abrupt end of tax support could suffocate a fragile recovery. Buyer confidence remains fragile — clear and consistent policy signals will be crucial in the coming months.

đź“Ś Key Takeaways

  • Temporary tax incentives end on June 30, 2025, except the “BĂ«llegen Akt” (€40,000 max).
  • New construction remains weak, with job losses and fewer pre-sales.
  • Existing properties benefit from stable support, and remain more accessible to buyers.
  • Public sector demand is currently keeping the market afloat, but private demand must return.

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