Luxembourg prepares to house Brexit bankers

The Grand Duchy is a choice for several insurers, funds and banks relocating from the UK as it prepares to leave the EU


LONDONLuxembourg’s red-light district could soon be a home for bankers escaping Brexit.

As the Grand Duchy prepares to welcome financiers relocating from the UK, a lack of housing has pushed the price of relatively modest family homes beyond the €1 million (RM5 million) mark.

That’s led to edgier areas being developed to keep up with demand, according to real estate brokers in the tiny country, attracting City of London firms looking for a foothold on the continent.

“These days, all neighbourhoods in Luxembourg are being explored,” said Julien Pillot at estate agency Inowai SA. That includes the seedy area of the nation’s capital dubbed Luxembourg city’s answer to the Bronx.

One luxurious project called “Soho” has sprung up around the rue de Strasbourg, which is slowly shedding its former reputation as a cut-throat no-go area populated by drug pushers and pimps.

Fifty-seven flats out of about 150 in total are planned to be ready before the summer, according to the project’s website, which features busy young people walking with their children and others driving Lexus, BMW and Mercedes cars. About 70% in the first project have already been reserved, with a handful of two-to-three bedroom options still up for grabs for between €566,814 and €869,734.

Just around the block, ING Luxembourg SA recently took over most of the office space in another major project right opposite the train station that was finalised in 2017. It includes 31 apartments where some of its staff will be housed.

Luxembourg has already become the nation of choice for several insurers, funds and banks relocating from the UK as it prepares to leave the European Union (EU). Insurance giant American International Group Inc, US insurer FM Global, RSA Insurance Group plc and Lloyd’s of London insurer Hiscox plc, as well as private-equity firm Blackstone Group LP and asset managers such as M&G Investments, have all chosen Luxembourg as their new EU hub. JPMorgan Chase & Co also plans to move some London-based bankers to Luxembourg.

In all, Brexit could create an additional 3,000 jobs with a growing number of companies expected to set up their new EU base there — adding to the demand for houses and apartments.

If sharing the streets with drug pushers and pimps doesn’t appeal, there are other options in Luxembourg city, the nation’s capital. But none is cheap.

The most coveted and expensive districts of Luxembourg city are Belair, Limpertsberg, Merl and Kirchberg, just a bike-ride or even a walk away from most offices, shops and restaurants. Homes, even the occasional “maison de maitre” 19th-century town house, can easily cost more than €2 million for at least four bedrooms.

“Prices keep increasing,” said Angelique Sabron of brokers JLL Residential. A million euros might just be enough to buy a new house near the city centre, and in the city’s most coveted areas it will pay for a two bedroom flat at most, brokers said.

The upward trend in Luxembourg contrasts with London, which has seen a Brexit-fuelled downturn in its sky-high rents and property prices.

The nation’s housing prices rose 4.9% in the last quarter of 2017 from a year earlier, according to statistics published by Luxembourg’s Statec in February. The average price for a house is just under €650,000. This rises to about €1 million for a house in the centre of the country, roughly double of what

a house would cost in the north. The trend is pushing more and more people away from the city, even across the border to nearby France and Germany, where cheaper and spacious housing is still available. It comes at the cost of a nightmarish commute.

While Luxembourg’s Housing Ministry dismisses the idea of a housing crisis, it recognises the growing pressure on prices as a result of the nation’s attractive position as a financial-services centre. The net number of people moving to Luxembourg is growing by about 13,000 people every year, according to Jean-Paul Marc, first government counselor at the Housing Ministry.

“That corresponds approximately to 6,000 new homes needed per year and this is what we’re in the process of catching up on,” said Marc.

Luxembourg has long-term plans for its city — where it sees the biggest housing challenges — to make life more enjoyable. The train station area is cited as part of this redevelopment plan, with zones in need of “urgent action”. Other towns just outside the city have also been growing in price, with the arrival of new schools, and the chance to get a patch of garden with a house.