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News & Knowledge

Luxembourg: A property El Dorado for the future?

22nd April 2020

The economic crisis that is set to follow the current pandemic will seriously impact growth in most European countries. Unlike its neighbours, however, the coming months should see Luxembourg become a haven for savers who wish to protect themselves against the inevitable economic downturn in the weeks ahead. MSI's Luxembourg law member Karp & Choucroun explains further.

An exceptionally robust property market

As of 14th March, Luxembourg, like most European countries, has fallen victim to the health crisis that is sweeping the globe, coming almost completely to a standstill. The property market has not escaped the effects of this exceptional situation, with property viewings (by both developers and builders) ceasing and construction works grinding to a halt.

Some prophets of doom claim that the entire property sector has reached an impasse because of the ongoing economic and health crisis.

Nevertheless, we feel that this analysis is not quite accurate, for reasons which we will present below.

The Grand Duchy of Luxembourg is one of the most stable countries in Europe from both an economic and a financial perspective.

Luxembourg’s GDP has risen to 70.89 billion USD against a public debt of just 22.1% (as of 2019) for a (constantly growing) population of 626,108 (as at 1st January 2020).

This low debt ratio – the lowest in Europe – has secured the Grand Duchy a AAA credit rating, which was confirmed on 14 March 2020 in the midst of a pandemic.

It should be borne in mind that, despite appearances, the country’s budget does not rely predominantly on the financial sector but rather on the property sector, which alone contributes a total of 37.38% to the state’s funds.

Prior to the implementation of containment measures, the total demand for properties was 9,695 in 2019. By contrast, the total number of property transactions in 2018 was just 7,543 – indicating that annual demand exceeds supply by 2,152 units.

In terms of buyer profiles, 78.76% of buyers are employees, managers and independent professionals looking for homes.

In the third quarter of 2019, residential property prices (apartments and houses across all sectors) increased by 11.8%. This development is not a recent phenomenon, however: property prices rose by 6.9% in 2016 and by 7.1% in 2017, followed by a further increase of 9.2% in 2018.

Why the property market in Luxembourg cannot fail

(“Stable outlook”. Standard & Poor’s 15 April 2020).

By upholding the triple A rating it has given the country, credit rating agency Standard & Poor’s has unequivocally confirmed the Grand Duchy’s economic and financial stability in the context of a pandemic that is sure to have significant economic repercussions.

Savers, but also investors who had focused on life insurance companies, will now turn to the property market, which offers more reassuring exit conditions and is nevertheless more profitable, with realistic returns of 7 – 10%.

Unlike our neighbours, the economic impact of the current pandemic will be limited here because Luxembourg can rely on the foundation of healthy economic growth that will enable the country to bounce back and find a balance by the start of 2021.

In the current context, Luxembourg will continue to enjoy growth of 2.3 – 2.5% for 2020-2023 – growth that is stimulated by strong internal growth, which in turn is largely driven by demand from French, Belgian, German and Luxembourgian customers intent on protecting their investments and preparing for retirement from now on and at all costs.


In light of the current information, it is realistic to assume that Luxembourg will continue to experience growth in 2020-2021. It may be the only European country that finds itself in this position.

The country can anticipate growth of 2%, driven by real estate investment. The crisis fiscal policy, the baseline of which will be: “We will not abandon any company, regardless of size”, is one of the strongest arguments in Luxembourg because every one of its citizens knows that the government has the means to honour such commitments.

The performance of the property market will depend on how these commitments are honoured. Prime Minister Xavier Bettel is unquestionably the man for the job.

It is the duty of the current Government and particularly Prime Minister Xavier Bettel to negotiate a way out of this slump using the economic measures announced.

Law firm KARP & CHOUCROUN is offering its clients the opportunity to establish a complete real estate project in Luxembourg, taking into account a predefined budget. This project will cover the entire process, from searching for the property through recognised partners (real estate agents or property dealers) in Luxembourg to representation at the signing of the notarised deed, and including the financing of the project, the fiscal aspects and the possible rental of the property (if not its resale), which will take into consideration the specific situation of the investor (residence, family circumstances, personal assets).

About Karp & Choucroun law firm - Luxembourg

Karp & Choucroun law firm was founded in 1995. The firm provide its clients, mostly medium size national and international companies as well as private individuals with quality judicial assistance and advice on their projects.

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