The 9th study of the audit firm Deloitte is categorical: Luxembourg is in 2019 the country in Europe where the purchase price of a new apartment is the highest. The national average is 7145 euros per m2 (for comparison per m2, 4523€ in France, 3861€ in the United Kingdom). Renting an apartment in Luxembourg City also tops the list, ahead of Paris and London, with an average price of 30.7 euros per m2.
More surprisingly, Esch-sur-Alzette (6th place) and Differdange (9th place) are in the Top 10 of the ranking, surpassing the rental prices of Madrid, Copenhagen or Barcelona.
So, how can the most expensive country in Europe in terms of housing be made more accessible?
While access to housing for households is no longer guaranteed, according to public statistics, "the announced rents of apartments are on average 61% higher than the rents of current contracts (€1,611 versus €998)", moreover, between 2018 and 2019, according to the Housing Observatory, the average selling price per m2 has increased by more or less 12% on average, the government, in the midst of the economic and social crisis of the coronavirus, has no choice but to take measures in favor of the applicants.
In 2021, it is taxation that the government wishes to tackle in its State Revenue and Expenditure Budget. And more specifically, speculation. Real estate speculation is indeed an important driver of rent increases.
On a smaller scale, and for individuals (thus excluding corporate owners), the executive had in 2016 reduced the taxation of the sale (i.e. taxes on real estate capital gains, on this subject, here are the links to articles on the taxation of real estate capital gains) of buildings in secondary residence. This has helped to boost the market (include an incentive to sell one's property, high prices being due to high demand and lack of supply, more than 72% of Luxembourg households being owners according to public statistics), but this has in no way stopped the mechanism of speculation in Luxembourg.
The problem is, as the Executive has identified, speculation through investment funds. Currently, investment funds (SIF regime or specialized investment funds) pay a subscription tax that aims at a very low rate (0.05% of assets). As of 2021, capital gains on real estate and fund rents will be taxed at a rate of 20%!
In addition, the depreciation rates for buildings (Depreciation is the recognition of the loss in value of a company's assets (including buildings) over time, understand that the depreciation recorded each year is deducted from taxable income: the higher it is, the lower the tax base) will increase from 6% to 5%, and even to 4% for assets of more than 1 million euros. These new rates will also apply to accelerated depreciation (for a new home intended for rental), and this accelerated depreciation will be over a maximum of 5 years instead of 6 years.
It is therefore a significant brake on speculation by investment funds in Luxembourg.
Will it be the same with regard to the crazy evolution of real estate prices and rents? The constant increase in demand for housing and the lack of supply, despite the various tax reforms in favor of the sale of private homes, leaves a serious doubt on the question, and even if this will limit the progression, no one can say that it will lead to its end.
