8: Luxemburg have you thought about property investment in Luxemburg?
Serious property investors should consider investment property in Luxemburg. PropertyInvesting.Net has done a socio-economic analysis that suggests the long- term house price growth will be above European trend for the following reasons
- Has a population that is forecast to increase from 449,000 in 2002 to 493,000 in 2010, 563,000 in 2025 and 594,000 in 2050. The population has already increased from 314,000 in 1960, so many people of 30-45 are now purchasing their first property.
- Is one of the three European parliament headquarters
- Is mainly a service related economy which will do well with expanding European Parliament and nations
- Is an important offshore banking centre, with attractive tax regime for the wealthy and relatively business friendly for entrepreneurs when compared with other EU countries
- Has relatively high fertility rate of 1.73 compared to other core EU countries (e.g. Germany, Italy, Spain)
- Has the highest GDP per Head of any country in the world ($41,950 end 2003, The Economist)
- Has the highest Purchasing Power of any country in the world by far this is 141.7 (USA is 100, UK is 71)
- Has a Human Development Index of 92.5 similar to Scandinavian countries
- Has the best/lowest Economic Freedom Index of any EU country 1.70 (UK is 1.85, USA 1.80) this measure government encouragement of economic freedom
- Had economic growth averaged 5.4% between 1991 and 2001
- Contributes 0.93% of world trade, and 2.5% of world invisible exports, despite its tiny size
- Has a very healthy and high economic cash surplus of 9% of GDP (most EU countries are in the range 1 to 3%)
- Has inflation which is low 2.1% (end 2003)
It is important to note that Luxemburg nationals and expatriates prefer to live in the vibrant city of Luxemburg rather than the rural and hilly north of the country. Even though the commute is short, expect prices to rise in the medium to longer term in the city through a combination of:
Shortage of land and environmental / development restrictions
- Low EU interest rates and bank rates
- Expanding local, expatriate and professional populations
- Expanding banking/service sectors
- Economy not reliant on historically under-performing manufacturing and agriculture
- Tipped by Experian economic study to be one of the only fast growing parts of central Euroland
- Attractive place to live and work, with high quality of life
- Historic areas, well kept, good inland retirement centre, low tax
A number of risks and uncertainties remain, which include:
- Luxemburg economic growth reduces because of the impact of low growth in neighbouring Germany, and possibly France and Belgium
- Tax harmonisation across Europe erodes Luxemburgs competitive edge as offshore banking centre against other western European countries with lower tax eastern countries attracting more services/trade
- New legislation and taxes discourage property investment and erode returns
- Flooding of market with investment rental or commercial property low office take-up
- Stability of employment
Before investing in property in Luxemburg, I would advise you to check these risks out.
It is also advised to explore areas on the French and German fringes of Luxemburg that may experience a ripple effect of rising property prices in immediate areas, within easy commuting distance to Luxemburg.
In the residential sector, in the medium-longer term, property developers are likely to build new luxury apartments close to the city centre. My advice is to focus on such areas but buy older one or two bedroom flats that are secure, preferably have off-street parking and are convenient for city amenities and offices. If the properties need redecorating and minor refurbishment and can be bought for a low price all the better. The older flats are likely to follow the new higher priced apartments up in price over time. Quiet residential areas in the older parts of the city, close to the city centre are mostly likely to be popular for both corporate tenants and locals (re-sales) in the coming years.