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Everything you need to know before buying real estate is included in our Luxembourg Property Pack
Luxembourg's property market offers some of the highest prices per square meter in Europe but delivers moderate rental yields between 2-4.5% depending on location.
As of September 2025, Luxembourg City properties average €11,967-€12,106 per square meter with gross rental yields of 3-4.5%, while northern regions like Wiltz offer more affordable entry points at €5,038-€6,744 per square meter but lower yields of 2.5-3.2%. Transaction costs are substantial at 10-15% of purchase price, and net returns after taxes and expenses typically range from 1.5-3.5%.
If you want to go deeper, you can check our pack of documents related to the real estate market in Luxembourg, based on reliable facts and data, not opinions or rumors.
Luxembourg property prices range from €5,038/m² in the north to €14,472/m² in premium Luxembourg City neighborhoods. Gross rental yields typically span 2.5-4.5%, with the best returns in Luxembourg City despite higher entry costs.
Net ROI after all costs, taxes, and vacancies ranges from 1.5-3.5%, with transaction costs of 10-15% and mortgage rates around 3.2-3.5% as of September 2025.
| Location | Price per m² (€) | Gross Yield (%) | Net ROI (%) | 1BR Monthly Rent (€) | Transaction Costs (%) | Vacancy Rate (%) |
|---|---|---|---|---|---|---|
| Luxembourg City | 11,967-14,472 | 3.0-4.5 | 2.0-3.5 | 1,800-2,600 | 10-15 | <2 |
| Esch-sur-Alzette | 7,375 | ~3.0 | 2.0-3.0 | 1,200-1,800 | 10-15 | <2 |
| Northern regions | 5,038-6,744 | 2.5-3.2 | 1.5-2.5 | 900-1,200 | 10-15 | 2-3 |
| National Average | 8,373-8,670 | 3.0-4.0 | 2.0-3.0 | 1,662 | 10-15 | <2 |
| Brussels (Belgium) | 4,400 | ~4.0 | 2.5-3.5 | 1,100 | 12-13 | 2-4 |
| Frankfurt (Germany) | 7,000 | 3.5-4.0 | 2.0-3.5 | 1,225 | 9-12 | 2-6 |
| Paris (France) | 12,100 | ~3.0 | 1.5-2.5 | 1,400 | 11-14 | 2-3 |
How much does an average apartment or house cost per square meter in Luxembourg right now?
Luxembourg property prices vary dramatically by location, with the national average sitting at €8,373-€8,670 per square meter as of September 2025.
Luxembourg City commands the highest prices at €11,967-€12,106 per square meter on average. Within the capital, prices range from €9,054/m² in Weimerskirch to €14,472/m² in the premium Belair neighborhood.
Esch-sur-Alzette, the country's second-largest city, offers more affordable options at approximately €7,375 per square meter. The northern regions present the most budget-friendly entry points, with areas like Wiltz and Diekirch averaging €5,038-€6,744 per square meter.
These prices reflect Luxembourg's position as one of Europe's most expensive property markets, driven by strong economic fundamentals, limited land availability, and high demand from international professionals working in the financial sector.
It's something we develop in our Luxembourg property pack.
What are the typical rental yields in different parts of Luxembourg?
Rental yields in Luxembourg vary significantly by region, with Luxembourg City offering the strongest returns despite higher entry costs.
Luxembourg City delivers gross rental yields of 3-4.5%, supported by extremely low vacancy rates under 2% and strong rental demand from international workers and EU institutions. The combination of high rents and strong occupancy rates compensates for the elevated purchase prices.
Esch-sur-Alzette provides moderate yields around 3%, offering a balance between affordable entry costs and decent rental income potential. The industrial heritage and proximity to Luxembourg City make it attractive to tenants seeking more affordable housing options.
Northern regions like Wiltz and Diekirch present lower yields of 2.5-3.2%, as purchase prices have risen faster than rental rates in these areas. While entry costs are lower, the rental income potential is correspondingly reduced.
Suburban areas around Luxembourg City typically fall between 3-3.5% gross yields, benefiting from proximity to the capital while offering more affordable purchase prices than city center properties.
How fast are property prices in Luxembourg expected to grow annually over the next five to ten years?
Luxembourg property price growth is expected to moderate significantly compared to the rapid increases of previous years, with forecasts suggesting annual growth of 1-2% over the next decade.
After a period of stabilization in 2024-2025, the market is entering a more sustainable growth phase aligned with economic and demographic trends rather than speculative demand. This represents a marked shift from the double-digit increases seen in previous decades.
Economic factors supporting modest growth include Luxembourg's stable financial sector, continued EU institutional presence, and ongoing population growth from international migration. However, affordability constraints and regulatory measures are tempering explosive price increases.
Regional variations will likely persist, with Luxembourg City potentially seeing slightly higher growth due to constrained supply and continued demand, while peripheral areas may experience more modest appreciation as the market matures.
Long-term investors should factor this moderate growth environment into their calculations, focusing on rental income rather than capital appreciation as the primary return driver.
What are the average monthly rental prices for different apartment sizes in Luxembourg?
| Property Type | Luxembourg City Center (€) | Luxembourg Suburbs (€) | Esch-sur-Alzette (€) | Northern Regions (€) | National Average (€) |
|---|---|---|---|---|---|
| 1-bedroom apartment | 1,800-2,600 | 1,500-2,000 | 1,200-1,800 | 900-1,200 | 1,662 |
| 2-bedroom apartment | 2,300-3,400 | 1,800-2,500 | 1,500-2,200 | 1,200-1,600 | 2,100 |
| 3-bedroom apartment | 3,000-5,000 | 2,200-3,200 | 1,800-2,800 | 1,500-2,100 | 2,800 |
| 4-bedroom house | 4,000-6,500 | 2,800-4,200 | 2,200-3,500 | 1,800-2,800 | 3,500 |
| Luxury properties | 5,000-10,000+ | 3,500-6,000 | 2,800-4,500 | 2,200-3,500 | 4,500+ |
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What are the ongoing costs of owning property in Luxembourg?
Property ownership in Luxembourg involves several ongoing costs that investors must factor into their ROI calculations.
Property tax is relatively low compared to other European countries, typically ranging from €100-€1,000 annually for most apartments or urban houses. Municipal authorities assess these taxes, so rates can vary between different communes throughout the country.
Insurance costs typically run €200-€400 per year for owner-occupiers, though this expense is often passed through to tenants in rental properties. This covers standard building and contents protection required by most mortgage lenders.
Maintenance expenses vary significantly based on property age and condition, with investors advised to budget 0.5-1% of property value annually. Older buildings may require substantial upkeep, while newer apartments typically have minimal maintenance requirements.
Condominium fees for apartment buildings range from €200-€350 monthly, covering building insurance, common area maintenance, and shared utilities. These fees can significantly impact net rental yields and should be carefully evaluated during property selection.
How high are transaction costs when buying property in Luxembourg?
Transaction costs in Luxembourg are substantial, typically totaling 10-15% of the purchase price, making them among the highest in Europe.
Registration duty represents the largest component at 6% of the purchase price for new properties, rising to 7.2% for resale properties. An additional 1% transcription tax applies to all transactions, with Luxembourg City imposing extra surcharges of 3-3.6%.
Notary fees typically account for 1% of the purchase price, covering legal documentation and registration processes. These professionals are mandatory for all real estate transactions in Luxembourg and provide essential legal protection for buyers.
Real estate agency fees can reach 3% plus VAT, usually paid by the seller but sometimes split between parties in rental transactions. These fees are negotiable but represent a significant cost component in the overall transaction.
Additional costs include property surveys, legal reviews, and various administrative fees that can add several thousand euros to the total transaction cost, particularly for higher-value properties.
It's something we develop in our Luxembourg property pack.
What financing conditions do Luxembourg banks typically offer?
Luxembourg banks offer competitive mortgage products with rates and terms that vary based on borrower profiles and property types.
Fixed mortgage rates averaged 3.20-3.55% as of June 2025, while variable rates stood at approximately 3.28%. These rates reflect the European Central Bank's monetary policy and Luxembourg's stable economic environment.
Loan-to-value ratios reach up to 100% for first-time buyers, 90% for other owner-occupiers, and typically 80% for buy-to-let investments. Standard repayment terms span 20-30 years, though longer terms may be available for certain borrowers.
Banks typically require that mortgage payments not exceed 35-40% of net monthly income, ensuring borrowers maintain adequate cash flow for other expenses. This conservative approach reflects Luxembourg's banking sector's prudent lending standards.
Non-resident buyers face stricter requirements, including higher down payments and more extensive documentation. EU citizens generally receive preferential treatment compared to non-EU nationals seeking financing.
What is the average vacancy rate for rental properties in Luxembourg?
Luxembourg enjoys exceptionally low vacancy rates, particularly in central areas where rental demand consistently outstrips supply.
Luxembourg City maintains vacancy rates below 2%, driven by strong demand from international professionals, EU institution employees, and students. This tight market creates favorable conditions for landlords and supports stable rental income streams.
Esch-sur-Alzette and other major towns also experience vacancy rates below 2%, benefiting from proximity to employment centers and relatively affordable housing options compared to the capital.
Northern regions see slightly higher vacancy rates of 2-3%, though these remain low by European standards. The reduced demand in these areas reflects longer commuting distances and fewer employment opportunities.
Seasonal variations are minimal, with Luxembourg's stable employment market and year-round housing demand preventing significant fluctuations in occupancy rates across different property types and locations.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Luxembourg versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How do rental regulations and tenant protections impact profitability?
Luxembourg's rental regulations became more tenant-friendly in 2024-2025 but still permit market-based rent setting with reasonable caps on increases.
Rent increases are limited to once every two years and cannot exceed 10% at a time, providing predictability for both landlords and tenants. This regulation prevents excessive rent inflation while allowing property owners to adjust for market conditions and inflation.
Lease contracts must be written and security deposits are capped at two months' rent, standardizing rental agreements across the market. These requirements protect tenant rights while ensuring landlords have adequate security for potential damages.
Tenant protections have improved recently, including clearer requirements for deposits, lease documentation, and rent adjustment procedures. However, the overall regulatory environment remains relatively landlord-friendly compared to more restrictive European markets.
Furnished rental properties can command premium rents, and the rent freeze reform remains under review, suggesting the regulatory framework may continue evolving to balance tenant protection with investment attractiveness.
How does the tax system affect ROI in Luxembourg?
Luxembourg's tax system significantly impacts rental property returns through progressive income taxation and various deductible expenses.
Rental income is added to the owner's global income and taxed at progressive rates up to 42%, meaning high earners face substantial tax burdens on rental profits. This progressive structure can significantly reduce net returns for affluent investors.
Property owners can deduct mortgage interest, insurance premiums, and certain maintenance expenses from rental income, reducing taxable profits. These deductions help offset the high marginal tax rates but require careful documentation and compliance.
Annual property taxes remain low compared to rental income taxes, typically representing a minor expense relative to overall property ownership costs. This favorable property tax environment supports long-term investment attractiveness.
Capital gains taxation offers favorable treatment after two years of ownership for primary residences, while investment properties receive tax relief after six years of ownership. This structure encourages longer-term investment strategies rather than short-term speculation.
It's something we develop in our Luxembourg property pack.
What are the expected net returns after accounting for all costs and taxes?
Net rental returns in Luxembourg typically range from 1.5-3.5% annually after accounting for all expenses, taxes, and vacancy allowances.
Luxembourg City properties deliver net ROI of approximately 2-3.5%, with the higher end achievable through careful property selection and efficient management. Despite high entry costs, strong rental demand and low vacancy rates support these returns.
Suburban and regional properties typically yield 1.5-2.5% net returns, as lower rental rates and slightly higher vacancy risks offset the reduced purchase prices. These areas may appeal to investors seeking lower entry barriers despite compressed returns.
Major expense categories reducing gross yields include income taxes (potentially up to 42% marginal rate), property management fees, maintenance costs, insurance, and occasional vacancy periods. Transaction costs of 10-15% also significantly impact overall investment returns.
Investors should model scenarios including periodic major maintenance, potential rent control changes, and varying interest rate environments to understand the full range of possible returns in Luxembourg's property market.
How does Luxembourg property ROI compare with neighboring markets?
Luxembourg property investments offer moderate returns with exceptional stability compared to neighboring European markets.
Gross rental yields in Luxembourg City (3-4.5%) compare favorably to Brussels (4%) and Frankfurt (3.5-4%), though Paris offers similar yields (3%) at comparable price points. However, Luxembourg's ultra-low vacancy rates provide superior occupancy security.
Transaction costs in Luxembourg (10-15%) exceed Germany (9-12%) but align with France (11-14%) and Belgium (12-13%). The higher costs are offset by Luxembourg's transparent legal framework and strong property rights protection.
Net returns after taxes and expenses show Luxembourg City achieving 2-3.5% compared to Brussels (2.5-3.5%), Frankfurt (2-3.5%), and Paris (1.5-2.5%). Luxembourg's stable regulatory environment and economic fundamentals support consistent performance.
Key advantages include political stability, strong economy, international demand, and robust legal protections. Disadvantages encompass high entry costs, compressed yields, moderate growth expectations, and complex tax regulations affecting overall returns.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Luxembourg property investment requires careful analysis of the substantial transaction costs, moderate rental yields, and complex tax implications that significantly impact overall returns.
While entry barriers are high and net yields moderate at 1.5-3.5%, the market offers exceptional stability, low vacancy rates, and strong legal protections that appeal to long-term investors seeking secure European real estate exposure.
Sources
- Immotop Luxembourg Real Estate Prices Q2 2025
- InvestRopa Average House Price Luxembourg
- Spuerkeess Luxembourg Property Market Momentum
- Global Property Guide Luxembourg Rent Yields
- Dwellworks Q1 2025 Europe Rental Markets Update
- Expatica Cost of Living Luxembourg
- EasyBiz Property Tax Luxembourg
- Central Bank Luxembourg Interest Rates August 2025
- Expatica Mortgages in Luxembourg
- Deloitte European Property Index