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Romain Muller (Firce Capital Fund): The Pains and Gains of Luxembourg’s Property Market

Large parts of Luxembourg’s property market have survived the disruption from the covid pandemic. But according to Romain Muller, Managing Director of the Firce Capital Fund, there are still financial complications to be overcome.

The Luxembourg Property Market

In some parts of the world, the covid pandemic was disruptive to the property market, as shops closed down and office employees moved toward home working. But in Luxembourg, there’s been little disruption. “In the office market, occupancy is very resilient due to the borders and the cross-border employees,” Muller explains. “They have a decent amount of days where they can do home office, but mostly they are back to the office, which is really fantastic for the office market occupancy.” Luxembourg’s distinctive cross-border population has also helped maintain the retail sector where, according to Muller, luxury retail and the mass market are still doing well, with only the middle ground of urban chic faltering. Occupancy and the income it provides remain strong.

​“If they don't get a mortgage from their bank, they end up paying more in rent for an apartment than they would for a mortgage.” – Romain Muller, Firce Capital Fund


Finance for Property

Things are more difficult in the residential market. “The number of sales has been decreasing by a significant percentage,” Muller says, “making it hard for developers with ongoing construction projects to sell their apartments.” In many cases, lowering prices to sell would make the work unprofitable. Rising construction costs and interest rates, together with land bought at high prices before the pandemic, mean that developers don’t have much wiggle room. This is driven in part by the caution of banks. By handing out fewer mortgages and demanding larger deposits, they’re fuelling a squeeze on property. In some ways, they’re not doing what banks are needed for – facilitating finance.

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The Future of Property in Luxembourg

According to Muller’s data, there was usually demand for 5,000-6,000 new housing units in Luxembourg pre-pandemic, thanks to the 15,000-20,000 new people arriving each year. With developers no longer seeing their previous profits, construction has fallen. The next year will see a tough housing market, with people stuck in rentals, which often cost more than paying a mortgage. But this isn’t an entirely new problem, according to Muller. “Before the pandemic and before the start of the war, we already had some trouble attracting talent to Luxembourg because housing was very expensive and limited.” If the country is to keep attracting the talent it needs, then the government may need to intervene, so much hangs on the election. As Muller says, he doesn’t have a crystal ball, but he doesn’t need one to see that things won’t change easily. It will take more than banks to save Luxembourg’s property market.

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