Home ownership minus land: the leasehold formula

More and more housing in Luxembourg will be sold on a leasehold basis in future. The model is intended to make property more affordable – but is increasingly being criticised. Reason enough to address the many practical questions – from financing to resale. The most important answers at a glance.

What is a leasehold?

Buying a leasehold property means buying a house or flat without a plot of land. The piece of land on which the property is located is leased, often for a period of 99 years. In most cases, an annual ground rent is to be paid. This amounts to around 304 euros for a flat and 562 euros for a house. For a parking space it is between 68 and 223 euros.

When and why was ground rent introduced?

The term "droit d'emphythéose" has a long history. In 2008, the legislation dating back to 1824 was dusted off and modernised with the "Pacte Logement" law. With this law, the government wanted to encourage municipalities to boost housing construction on their territory.

In the draft legislation, "emphyteusis" was described at the time as a "favoured means of significantly reducing far too high land costs". Through state subsidies, the leasehold system was intended to become "the preferred form of land provision by public property developers". Together with other measures, the CSV-LSAP coalition, three years after the housing policy mea culpa of the then-Prime Minister Jean-Claude Juncker, aimed to increase the housing supply and "to reduce or permanently stabilise land and housing prices", as the draft legislation stated at the time.

Since then, prices on the private market have risen continuously: prices for building plots increased by an average of 8.1 per cent annually between 2010 and 2021. And the no less impressive rise in housing prices over this period was "mainly due to the increasing cost of building land", stated the Observatoire de l'Habitat in July 2023.