Luxembourg: Overview

RENTAL YIELDS

Last Updated: Mar 18, 2009

Highest yield for Luxembourg apartment at 5.23%

Luxembourg City apartment sale prices average around €5,000 per sq. m., with apartments of 120 sq. m being the most expensive, at €5,400 per sq. m.

Gross rental yields on apartments in Luxembourg City average 4.49%, with 40 square metre (sq. m.) apartments generating the highest gross rental yields, at 5.23%.

For house-buyers, Moselle is slightly more expensive than Oesling, with a 150 sq.m. house in the former costing around €412,000, versus around €338,000 in Moselle. This represents a sale price of around €2,698 per sq. m. in Moselle, versus €2,255 per sq. m. in Oesling.

For rents of houses in Moselle and Oesling, there is not enough data to give either rentals, or yields.

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TAXES AND COSTS

Last Updated: Jul 21, 2008

High taxes despite tax-haven reputation

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	7.02%	10.1%	14.2%
Click here to see a worked example
Source: Disclaimer

Rental Income: Rental income is taxed at progressive income tax rates ranging from 8% for net annual income above €10,335, to 38% on income above €36,570.

Capital Gains: If the property is held for more than two years, capital gains tax rates are reduced to a maximum of 19.475%.

Inheritance: Inheritance tax is payable only if the property is obtained from a non-resident, at rates between 2% and 15%.

Residents: Residents of Luxembourg are taxed on their worldwide income.

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BUYING GUIDE

Last Updated: Apr 02, 2007

Buying costs are moderate in Luxembourg

Total roundtrip transaction cost, i.e., the cost of buying and selling, is between 11.15% and 15.65% inclusive of registration fees (6% - 10.2%) and estate agent's commission (3% plus 15% VAT).

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LANDLORD AND TENANT

Last Updated: Jun 29, 2006

Luxembourg has strong tenant protection laws

Luxemourg's rental market is strongly pro-tenant.

Rent: Rent control limits the amount of returns a landlord can receive. Rent can only be increased every three years.

Tenant Security: If evicted, the tenant is usually awarded generous compensation and more than sufficient time to look for an alternative dwelling.

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ECONOMIC GROWTH

Last Updated: Jul 11, 2008

Small is bountiful in the Grand Duchy

The Grand Duchy of Luxembourg does justice to the saying “small is bountiful.” Landlocked by France, Germany and Belgium, it is one of the world’s smallest countries with 2,586 sq. km. in area and a population of 476,000 in 2007. Economic prosperity was originally attributable to the steel industry, but with its decline, Luxembourg has flourished as a key banking and financial center for Europe.

Luxembourg is home to several key EU offices, such as the commission itself, the Court of Justice, the Secretariat of the Parliament and the EIB. With rising real wages and stable economic growth, Luxembourg is a magnet for migrants. More than a third of its population is foreign-born. Most foreigners working in Luxembourg actually commute daily from Belgium, Germany and France where costs are usually lower.

The economy expanded by 4.5% in 2007 after growing by an average of 5.2% annually from 1999 to 2006. Real compensation per employee grew by an average of 3.75% annually from 2000 to 2007. GDP per capita, already the highest in the world at US$104,670 in 2007, grew by an average of 3% annually over the same period.

Luxembourg’s strong economy is supported by a stable parliamentary democracy and constitutional monarchy with long-serving administrations. Owing to its geographical location, the country has developed a unique mix of culture and language, largely of German, Belgian, and French influences.