In July the government announced the introduction of a new accelerated depreciation rate of 6%, to offer tax advantages for investments in rental properties. However, the 6% is capped at 600,000 euros' worth of building costs, at which point it then drops to 2%.

On Thursday, the Minister for Housing, Claude Meisch, confirmed he was sticking to the measure, despite pressures from developers, investors, and even fellow members of the DP, all of whom believe the 6% rate should be maintained even if construction costs exceed €600,000.

Speaking at the Home-Expo, Meisch said the measure was designed to get new, affordable and smaller rental properties on the market.

"If developers tell me that they can't keep their building costs under 600,000 euros, then I must wonder how it can be done", he said.

The tax advantage for investing in rental housing was reduced to 4% under the previous government, which can be added to the special real estate tax deduction of 1%. This is because in times of low interest rates, the measure fuelled demand even more and pushed up prices.