© RTL
Build more and faster. That is the goal of the DP-CSV coalition this year, with simplified procedures and favourable tax conditions.
Due to high prices, inflation-related interest rate hikes and economically uncertain times, housing sales have collapsed. In 2023, 41% fewer properties were purchased than in 2021, with the construction sector particularly affected. The sale of flats on plan has slumped by 75% compared to 2021.
Tax incentives for buyers
The government plans to introduce a series of tax measures aimed at revitalising the housing market. These include lower deed registration fees, accelerated depreciation, and reduced capital gains tax—benefits designed for buyers, investors, and sellers alike. These temporary measures, set to be announced in late January, aim to inject fresh momentum into the sector.
Since May, property sales have shown a gradual recovery, particularly for existing apartments, which have outperformed off-plan properties. Housing Minister Claude Meisch noted on 4 December that the tax incentives have been more effective for existing apartments, as sellers have been more willing to lower prices compared to property developers. "This lack of flexibility from developers is something I criticise," the minister said.
That said, the construction sector remains under strain. By September 2023, 147 construction companies had declared insolvency — a 24% increase from the previous year — resulting in 1,048 job losses, a 45% rise.
Limited uptake of 'Prolog' incentive
A support mechanism introduced by five Luxembourg banks in July, known as Prolog, has seen little interest from developers. Prolog facilitates residential construction even when not enough units are sold to meet legal completion guarantees.
Gerry Grbic, Director of the ABBL banking association, described the initiative's success as "limited." While some inquiries have been made, promoters have shown reluctance to take advantage of the program. Efforts are underway to improve Prolog’s conditions, with its duration extended from 2023 to 2025.
Signs of recovery?
An October incentive halving registration fees for homebuyers — valid until mid-2025 — appears to be driving increased activity. This measure also applies to investors purchasing off-plan properties.
The Housing Minister and ABBL report growing activity among notaries and banks, with a rise in property loans. This recovery is also supported by a reduction in the European Central Bank’s lending rate, which has dropped from 4% to 3% since June 2023.
To sustain this momentum, Prime Minister Luc Frieden announced on 6 December that temporary tax measures would be extended until mid-2025.
At an environmental cost?
A national housing assembly in February will discuss ways to accelerate construction. Prime Minister Frieden has hinted at reviewing the proportionality of environmental regulations to housing needs, as well as re-evaluating laws that exceed European directives. A revision of the Nature Conservation Act is also underway, though it faces criticism from environmental groups.
Meanwhile, the national building code, intended to simplify and standardize regulations, is not expected before late 2025. The Interior Minister confirmed to RTL that the working group’s recommendations would be ready by autumn 2025, with legislation likely to follow by year’s end.
State investments in housing
To address housing shortages, the government has committed to purchasing additional off-plan properties. Beyond the 170 units already acquired, Housing Minister Meisch announced plans back in January to allocate €480 million to buy around 800 apartments, build them, and rent them out as social housing.
As of 19 December, the state had finalised six agreements for 208 units costing €126 million, while the Housing Fund had purchased 61 units for €39 million. The average price per square meter, including parking, is €7,525.
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