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With foreigners streaming in and inventory struggling to keep pace, the tiny country is demanding some ‘totally insane’ prices, local brokers say.
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Built with local wood and engineered for energy efficiency, this four-bedroom house is in Mertzig, Luxembourg, about 23 miles northwest of the capital, Luxembourg City. Belgian architecture firm Crahay & Jamaigne designed the home, which was constructed in 2011 by Luxembourg builder Naturhome, a specialist in wood houses.
“The house is quite special,” said Françoise Lelièvre of Engel & Völkers Luxembourg, the listing agency. “Everything is designed to bring light into the house, and the architects put windows everywhere they could.”Set on a hill, near forests and farmland, the 2,260-square-foot home enjoys “exceptional views to the horizon,” Ms. Lelièvre said. To take advantage of the scenery, the architects placed the living room, dining area and open kitchen above the bedroom level. The dining space opens to a covered terrace with a metal staircase leading down to the home’s rear garden and patio.
There are three bedrooms on the level below the living area, including the main suite, with glass doors that open to the rear patio. Two flights up, a mezzanine, brightened by a skylight, overlooks the living area and includes a loft-like bedroom and office. A dumbwaiter accesses each level.
The home’s energy-efficient features include its envelope, assembled in Canadian wood-frame construction. The technique uses wood-based fibers as insulation between horizontal and vertical wood beams. “It doesn’t let water or wind in, and lets humidity out,” Ms. Lelièvre said. A clean-burning heating system uses locally sourced wood pellets as a fuel source.
On the street side, the house features a two-vehicle carport beneath the first floor. While the front of the home presents uniform shades of gray wood, the back reveals richly textured hues of hundreds of beams. Its wooden roof is also distinctive. “It was the architect’s choice, and you don’t see a lot of them,” Ms. Lelièvre said.
The town of Mertzig, with about 1,440 residents, is in Diekirch, one of Luxembourg’s 12 political regions, known as cantons. “Mertzig has a very good infrastructure, which is not always the case with little towns in Luxembourg,” Ms. Lelièvre said. The town is also “very green oriented, with actions in green energy supply, programs to raise awareness of environmental issues, and organic and fair-trade food in school canteens,” she said.
Luxembourg Airport is about 20 miles south. The town of Bastogne, just across Belgium’s border, is about 30 miles northwest.
Sandwiched between France, Belgium and Germany, Luxembourg is one of Europe’s smallest sovereign states. But as a hub for banks, corporate headquarters and several European Union agencies, it attracts a steady stream of new arrivals from around the continent.
According to a 2022 report from the International Monetary Fund, Luxembourg has Europe’s lowest unemployment rate and the world’s highest GDP per capita. Coupled with a slow pipeline of new housing, that has pushed property prices to stratospheric heights.
“Over the last 30 years, the population of Luxembourg has probably doubled,” said Victor Rockenbrod, founder of the Rockenbrod Real Estate Agency in Luxembourg City. “There’s a lot of construction, but not enough. So prices keep rising. It’s simple supply and demand.”
Luxembourg was one of five nations cited for “overvaluation” of real estate in a 2021 European Union report. “Prices have grown very dynamically in the recent years, outpacing both income growth and rent growth,” the report said. Prices for detached homes in the third quarter of 2021 rose 14.6 percent over the previous quarter, to 1.81 million euros ($1.98 million), according to government statistics. The average apartment price in Luxembourg City was 10,897 euros a square meter ($1,100 a square foot) in 2021, far above the national average of 7,805 euros a square meter ($790 a square foot).
Amid the pandemic, some capital residents have decamped for larger spaces in leafy areas like Mertzig, which “had originally been farmland, but you’re starting to see development,” Ms. Lelièvre said. “With prices in Luxembourg City so high, a lot of families with children want to settle in greener areas like this, even if they have to be further away from the center.”
Indeed, prices have played a bigger role than Covid-19 in the exodus, said Harald-Sven Sontag, a Realtor at RE/MAX Forum. “We’ve arrived at a level where new projects cost about 17,000 euros per square meter in the capital,” he said. “If you’re very rich, it’s fine. But for a normal worker, even with a good salary in the financial sector, 17,000 euros per square meter is too expensive. Salaries are not following these increases. Banks are even offering 35-year mortgages.”
Some buyers have started looking in Belgium and Germany, where prices are “high, but still lower than here,” he said.
A sclerotic development process has also hindered new housing, Mr. Rockenbrod said: “Planning and permissions take much too long. The delay between a developer’s buying property and being able to develop it is something like eight to 10 years.”
Apartments make up most of Luxembourg City’s housing stock. Christoph Krause, founder of CK House & Realty in Luxembourg City, estimated the average price of an apartment in the capital at 10,000 to 13,500 euros a square meter ($1,015 to $1,370 a square foot), with houses outside the center starting at about 8,000 euros a square meter ($810 a square foot). “Two years ago, when you spoke about cities north and south of the capital, you were talking 4,000 to 5,500 euros per square meter,” he said. “Now, it’s between 6,500 and 8,000 euros. This is totally insane.”
Mr. Rockenbrod said that for a “decent” detached house, “a buyer can easily anticipate spending at least 1.5 million euros.”
Foreigners make up almost half of Luxembourg’s population of about 632,000, according to government statistics, with the majority coming from Portugal, France and Italy. The 998-square-mile nation is home to citizens from more than 170 nationalities.
Naturally, expatriates and new arrivals “are a substantial part of the buyers in Luxembourg,” said Jean-Jacques Michaux, a founding partner of the Properties of Luxembourg agency.
European Union citizens predominate, he said, with a few buyers from the Americas and a smattering from Asia and India.
There are no restrictions on foreign buyers in Luxembourg. “If you know what you want and you’re willing to pay the price, there’s really nothing in your way,” said Fabio Trevisan, a founding partner at the Luxembourg City law firm BSP. A buyer typically signs a preliminary contract with the seller’s agent, rather than with the seller. “That contract sets the price and conditions for purchase,” he said.
A notary public performs due diligence on both the buyer and the property. “You need to check that the buyer’s money comes from a lawful source, and that the person is not indicted somewhere or the subject of criminal charges,” Mr. Trevisan said. While foreigners commonly obtain mortgages in Luxembourg, he said, “opening a bank account takes forever, with a lot of questions asked, documents requested, and levels of detail about who you are and where you make your money.”
The notary executes the final purchase agreement and, after funds are transferred from buyer to seller, remits all applicable taxes and pays any remaining mortgage debt on the property, Mr. Trevisan said.
There are no down payments in Luxembourg, but “there is a 10 percent penalty for backing out of a contract, unless it’s because your mortgage was refused,” said Paul Leyder, a partner in the tax practice at accounting firm BDO, in Luxembourg City.
Town of Mertzig: mertzig.lu
Luxembourg government: luxembourg.public.lu
Luxembourg tourism: visitluxembourg.com
Luxembourgish, French, German; euro (1 euro = $1.09)
Foreign buyers and Luxembourg citizens pay the same taxes on property purchases, Mr. Leyder said. A registration duty of 6 percent and a transcription duty of 1 percent are assessed on the purchase price. Any buyer who uses a property as “personal housing” for at least two years can apply for a partial reimbursement of those duties, to a maximum of 20,000 euros. Applying for the reimbursement costs 100 euros.
A reduced value-added tax of 3 percent applies to new construction, Mr. Leyder said, as long as a purchaser lives in the residence for at least two years. For both foreigners and Luxembourg citizens, the resale of a property is exempt from capital-gains taxes if certain conditions are met, like having made the home a principal residence.
Notary fees are set by the government at 1 percent of the property value. Real estate commissions in Luxembourg average 3 percent, with a 17 percent value-added tax, agents said.
Ms. Lelièvre declined to disclose property taxes on this home, but such taxes are generally calculated at 0.7 percent to 1 percent of the property’s assessed value annually, according to Luxembourg Inland Revenue, the tax authority.
Françoise Lelièvre, Engel & Völkers Luxembourg, 011-352-28-26-17-27, www.engelvoelkers.com/fr-lu/luxembourg/
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