Do Good Things Come in Small
Packages?

As Europe’s smallest country, it seems surprising that Luxembourg may
provide a wonderful opportunity to make money for the overseas property investor.
Despite its size, Luxembourg has great potential and is well worth consideration
by any prospective investor. Take a look at the facts…

Positive trends

Luxembourg has a huge number of positive trends, which suggest that it is
a good property investment spot for foreign investors. Firstly, the population
is growing at a faster rate than many other European countries. In 2002, the
population was 449,000; this is set to reach 493,000 by 2010 and a staggering
594,000 by 2050.

Not only is the population increasing, but it is also becoming wealthier.
Luxembourg is one of the three European parliament headquarters and, as such,
is attracting a large number of young professionals to service the legal and
governmental roles.

As Luxembourg is considered to offer a very favourable tax jurisdiction, many
wealthy investors and companies will use Luxembourg investment vehicles to
maximize the taxation regime benefits. These types of vehicles are staffed
by generally well educated, highly paid individuals who are looking for luxury
accommodation, for the duration of their stay in the capital. This trend is
supported by the fact that 30 percent of the country’s residents are
foreigners, often working in the country for a temporary period.

The figures back this up showing that, currently, Luxemburg boasts the highest
GDP per head in any country, globally, at $41,950, as stated in The Economist
magazine. Growth has been solid in recent years averaging at 5.4 percent over
the last decade and inflation remains low at around 2 percent. Amazingly, Luxemburg
contributes 0.93 percent of world trade, which is a much larger percentage
than its geographic size would suggest.

Despite the small size of the country, meaning that commuting to the capital
would never be a particularly long process, most professionals opt for city
living. As a result, properties in the rural areas are not as coveted by investors
as there isn’t the rental potential that exists in the city.

Why Invest in Luxembourg?

All of these growth figures make interesting reading, but what exactly does
it mean to a property investor? Research has suggested that the countries which
see the greatest property price growth are those with a good percentage rate
GDP growth, as well as a population growth. In particular, when these factors
are combined with a country that has stringent planning laws, preventing sufficient
properties being built to cater for the increasing population, prices are likely
to rise. This is even more so when the population is wealthy and able to sustain
the growing prices. Based on this theory, Luxembourg presents a wonderful investment
opportunity for the future.

Practicalities

Luxembourg is a member of the EU, which means there are no restrictions on
foreign ownership. The main area for property is Luxembourg
city, as this includes around a quarter of the population of the country living
within the immediate vicinity. From a rental point of view, this is also the
strongest area, as this is where visiting business people are more likely to
be resident.

Other areas that attract visitors and offer a potential rental market include
the wine region of Moselle, which is the centre and south of the country and
Oesling in the north, which is an area of scenic beauty and is popular with
tourists from all countries.

Buying a property in Luxembourg is a relatively quick and straightforward
process. Bear in mind that demand for property is quite high and properties
are rarely advertised with ‘for sale’ boards, in the same way
as in the UK, so make sure you ask around and use a reliable agent to source
possible properties.

The main document is the ‘sales agreement’, which is a written
contract to execute the sale. A public notary will have to be present at the
signing to ensure that the property is registered and recorded in the notary’s
deed.

Expect to pay 6 percent of the cost of acquisition (or market value, if this
is more) for property registration and 1 percent as a transaction tax. Annual
taxes of around 0.7 percent to 1 percent per annum are payable for municipal
services. There are various tax breaks available, depending on your circumstances
that can make purchasing in Luxemburg particularly favourable; contact a local
tax specialist for more details on what would suit your situation.

As Luxembourg is considered the financial heart of Europe, it is not surprising
that there is a range of mortgage and finance options available for locals
and foreigners. As with any foreign purchase, it is vital that you receive
independent legal and financial advice, to ensure that you get suitable individual
advice.

Luxembourg offers strong financial long-term growth, in a stable and developed
economy. Any investor wanting a longer term solid investment should really
take some time to look at Luxembourg as a genuine good bet.

For more information take a look at these web sites:

www.remax.lu/Maps/Luxemburg.asp?Lang=ENX&SearchType=O
www.homesonsale.co.uk/pages/196.htm
www.overseasrealestate.co.uk/Buying_Guides/luxembourg_property/luxembourg_property.html

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