Bettel pledges to curb house prices in tax reforms

Prime Minister Xavier Bettel pledged to act against rampant housing prices that have pushed thousands across the border in search of cheaper property, saying he would set up a register to tax empty dwellings to counter speculation.

Calling unaffordable property "the main reason for exclusion" in the country, Bettel said the measure would enable the government to tax home owners that leave available housing empty because they are not interested in any rental income, but are just waiting for prices to go up.

"With this reform, we are not targeting people who live in their own homes, but those for whom housing is merely an object for speculation," Bettel said during an annual policy review for a packed session in parliament.

In his annual "state of the nation" speech - which he presented one day ahead of the budget for the next year - Bettel also touched on new measures to fight climate change and public finances.

House prices rose by more than 17% last year and empty flats have contributed materially to the country's ballooning property prices. Around 70,000 citizens have opted for cheaper housing in neighbouring Germany, France or Belgium.

The government will also mandate that plots of land will have to be built on within "a certain period", Bettel said. After that, the land will be reclassified as a non-constructible zone, making it far less valuable.

The value of land designated to be built on rose by a cumulative 83.3% between 2010 and 2019, while house prices rose by 65.3% for existing units and by 61.8% for homes under construction over the same period.

Climate change

Bettel also announced new measures in the fight against climate change, saying the government will start making cash available to offset the carbon dioxide emissions stemming from work travel by ministers and civil servants from 2023, saying the government wanted to set a "good example".

The government will also continue to invest in fast-charging hubs for electric cars, an extension of railway tracks and better parking facilities at train stations outside the capital, Bettel said. Subsidies for electric cars - up to 8,000€ - and for electric bicycles - up to 600€ - have already driven more people to buy climate-friendlier methods of transport, he said.

The government is mulling a so-called "sustainability check" for future legislation and regulation - a mechanism to make sure that Luxembourg hits its climate change targets, Bettel said.

In 2020, 11% of all energy consumed in the country came from renewable sources such as wind and solar power, a first milestone in Luxembourg's self-imposed goal of cutting greenhouse gas emission by 55% by 2030 compared to 2005 levels. By 2030, renewable energy should make up a quarter of Luxembourg's energy supply, Bettel said.

Good public finances, more benefits

Luxembourg will need no austerity measures nor any tax increases given its sound public finances, Bettel said. The pandemic hit the Grand Duchy far less severaly than most other European countries, with GDP dropping just 1.8% in 2020. Growth for this year is forecast to be 6%, meaning the country's economy will be larger at the end of this year than it was before the pandemic began.

The government will start indexing child benefits again as of January next year and the most recent 2.5%-indexation of wages and pensions will also apply to those benefit payments, Bettel said. The state will also provide free homework help to primary school kids and day-care will also be made free.

Another area that is seeing a cash injection in 2022 is broadband, with the government setting aside €7.7 million to improve missing internet connections. On Wednesday, finance minister is scheduled to unveil next year's budget in parliament.

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