The average price of houses soared by 7.75% (7.57% inflation-adjusted) during the year to Q3 2016, according to the Ministere du Logement, after slower y-o-y growth in the first two quarters: 3.11% in Q2, and 3.07% in Q1. Apartment selling prices increased by 7.53% y-o-y (7.35% inflation-adjusted) in Q3 2016, following robust price rises of 5.37% and 6.31% in Q2 and Q1 2016, respectively.
During the latest quarter, house prices were up by 3.29% (3.35% inflation-adjusted), apartments were up by 2.86% (2.92% inflation-adjusted). Property transactions rose by 1% y-o-y to 6,333 units in 2016, according to the National Statistical Institute (STATEC)..
By property type:
- Existing apartments’ average price rose by 7.3% y-o-y to €4,795 (US$ 5,331) per sq. m. in 2016.
- New apartments’ average prices rose by 8.3% y-o-y to €6,051 (US$ 6,727) per sq. m. in 2016.
Construction is up. The number of one-dwelling residential permits rose 11.2% y-o-y in 2016, according to STATEC, and permits for two or more dwelling residential buildings rose 15.6% y-o-y.
A tax reform which came into effect on January 1, 2017 is encouraging house purchases:
- The taxable rental value has been abolished.
- The amounts of mortgage interest deduction related to a taxpayer’s primary residence are increased to:
- €2,000 (previously at €1,500) for the first six years of occupation;
- €1,500 (previously at €1,125) for the next five years; and
- €1,000 (previously at €750) in the subsequent years.
- The home saving contributions ceiling tax deductible has been doubled, from €672 to €1,344 for individuals aged 40 years old and below. The €672 ceiling will still be applicable to taxpayers above 40 years old.
- For house sellers, the government has reduced the capital gains tax rate from 50% to 25%, for real property sales between July 1, 2016 to December 31, 2017. The property should have been owned by the taxpayer for at least two years. Capital gains from the sale of a main residence are not taxable.