Luxembourg

Macroeconomic pressure on Luxembourg’s real estate sector has translated into a lower volume of property sales, which is hurting the businesses of those who sell real estate properties – real estate agents. They are now screaming bloody murder. 

“The market is suffering,” said Jean-Paul Scheuren of the Luxembourg real estate chamber, speaking of the real estate market generally. “Everybody is like on hold, on hold, and also the demand is on hold.”

Luxembourg’s reputation for excessive house prices is facing macroeconomic clouds looming over European and international housing markets. However, several country-specific factors will likely minimise the price drops seen in other markets, including tax measures, cheaper housing across the border, and a small development community.

Geopolitical uncertainty, rising interest rates, more stringent sustainability requirements, modernisation of the regulatory environment, democratisation of private equity, and pressure on costs and margins are expected to shape the next twelve months in the grand duchy’s financial system. Camille Thommes, Nicolas Mackel, Jerry Grbic, Stephane Pesch, Nicoletta Centofanti and others told IO what they expect in the new year.

One might have thought Luxembourg’s real estate market was doing well compared to other European cities, but for a long time, exact comparative numbers weren’t available. That’s all changed with the release of a new property index covering Luxembourg, the result of an 18-month long labour-intensive and expensive project.

The EU court ruling ending public access to European ultimate beneficial owner registries lays bare a long-standing political-legal dispute in society over what sorts of interests should be paramount: jurisprudence or morality. As Luxembourg awaits a solution on restoring access for professionals, Investment Officer spoke to a number of legal specialists about the case.

The exact impact on private asset values of this year’s declines on global stock and bond markets has yet to be determined, but already some family offices are concerned about the shifts in their portfolios. “There are capital calls that have not been met,” a UBS banker told the Alfi conference on Tuesday.

The data leaves no doubt about it. This year is a tough one for investors everywhere. It’s very clear in the numbers reported this week, both for Europe and for Luxembourg, the domicile for about 10.000 Ucits funds, about one third of all such funds in Europe. Luxembourg’s loss of total fund value this year now is roughly equivalent to the size of an economy like Taiwan. At a European level, the losses can be compared to an economy the size of Canada.

Housing markets in major cities across the world face a “prolonged stagnation” in purchase prices and a price correction. House owners and real estate investors should not expect the market to trend sideways. It’s “game over” for housing markets, Swiss bank UBS writes in its latest Real Estate Bubble Report.

With a rise in interest rates, finance costs have increased while financial markets across the world have been rocked by geopolitical developments and severe declines in asset prices. 

Luxembourg is one of six countries that are most competitive in terms of taxes among the world’s 38 most developed economies, according to the latest International Tax Competitiveness Index. 

While this might seem to lend ammunition to those who criticise Luxembourg as a tax haven, the picture painted in the report is somewhat nuanced. For example, it also ranks fellow cross-border business hub Ireland as 35^th out of the 38 OECD member states.

Plans by Paris-based Caceis to take over RBC Investor Services’ European business are raising redundancy fears among the firm’s 900 or so Luxembourg-based staff members in Belval.