Seven Measures, Thirty-Five Million

The Luxembourg government presented its construction "booster package" to the Chamber committee on Thursday. Finance Minister Gilles Roth and Housing Minister Claude Meisch unveiled seven measures aimed at getting the housing market moving again. The total cost to the state is estimated at around €35 million in lost tax revenue, which is a remarkably modest figure for a package that touches registration duties, tax credits, and depreciation rules.

Here is what is in it:

1. Higher Bëllegen Akt. The homebuyer tax credit on notarial deeds increases from €40,000 to €45,000 per person. This is the most direct demand-side measure. For a couple buying together, that is €90,000 in tax credits.

2. Interest subsidy on a larger loan. The subsidy will now be calculated on a loan of up to €300,000 instead of €200,000, but restricted to first-time buyers under 35. The threshold can increase slightly depending on the number of children.

3. Accelerated depreciation. Reintroduced at 6% over six years, but now capped at €600,000. This is aimed at rental investment.

4. Zero registration duty on off-plan purchases (VEFA). This is the headline measure. Registration duty drops to 0% until the property is 80% complete. The idea is to get buyers to commit early, which gives developers the cash flow to actually build.

5-7. State purchases and housing bond. The government has agreed to dedicate €300 million to state purchases of off-plan homes. Meisch said the state has already committed €470 million and can now take advantage of further purchasing opportunities. A housing bond was also mentioned.

The ministers presented graphs showing that someone buying a €1 million home could pay between €5,000 and €33,600 less depending on which measures apply. Roth was careful to frame this as "not a package to support developers who bought land at too high a price," but rather as a way to get authorised projects to actually break ground. Before the pandemic, there were not enough projects on the market. Now there are many authorised projects that never come to fruition.

The risk with any demand-side stimulus is that it pushes prices up if supply does not follow. Meisch acknowledged this and said the measures would be closely monitored and evaluated, with reports back to Parliament. He also pledged to continue discussions with municipalities, since housing supply ultimately depends on municipal planning decisions.[1]

What stands out is the cost. €35 million in lost tax revenue is small for a national budget. Roth even noted that increased activity in the housing market could generate additional revenue that offsets the loss. If that calculation holds, the package costs nothing.

The VEFA measure is the most interesting one. Zero registration duty until 80% completion is a strong incentive for buyers to commit early, and early commitments are what developers need to secure financing. The risk is that it rewards developers who already have authorised projects sitting idle, but Roth addressed this directly: he warned that abuses could trigger further measures. That is a polite way of saying "do not take advantage."

The age restriction on the interest subsidy (under 35, first-time buyers only) is a targeted choice. It helps young households enter the market without subsidising second-home buyers or investors. Combined with the higher Bëllegen Akt, it makes buying a first home meaningfully cheaper.

Construction in Luxembourg has been in a downturn for a while. Prices stabilised but transaction volumes dropped. Projects got authorised but stayed on paper. This package is not dramatic, but it does not need to be. It is a set of targeted nudges that cost the state very little and remove a few specific frictions. Whether it works depends on whether municipalities play along and whether developers meet the government halfway on price.