“To finance the purchase of €1m property over 20 years at 4.5%, you have to pay €6,350 per month. This means that you need an annual income of €228,624. The average annual salary in Luxembourg is €72,250. Four times less. Less than 3% of Luxembourg households can afford it.” Immobel’s business developer, Xavier Hauboldt, let a silence pass.
Data published this week showed that the average price of a property in Luxembourg City is €1,090,887.
In the Cercle Munster, where some sixty professionals responded to the Ecofin Club’s invitation, everyone nodded, and continued to nod their heads at each new figure from the speaker.
Refused applications and fewer new homes
“This morning on RTL, Françoise Thoma (the director general of Spuerkeess, editor’s note) explained that last year the number of credit applications fell by 45% and that the number of rejections of these applications remained stable at 20%. I have my doubts,” Hauboldt said. “According to my indications, the acceptance rate of applications varies from 40% to 75%.”
Faced with more sparingly granted loans, the supply will not be sufficient to meet the needs of the Luxembourg economy. “Luxembourg creates 12,500 net jobs per year and needs at least 6,000 housing units to meet the needs. Luxembourg is only putting 3,800 more units on the market each year. In 2023, it will be more like 2,300,” Hauboldt said, with a synchronised movement of heads in the room.
“The Chamber of Skilled Trades and Crafts estimates that 80,000 new homes will be on the market by 2030, but that figure will be closer to 55,000. Building permit applications fell by 23% last year. We only sold 5% of what we used to sell.”
€8,300 per square metre, affordable?
Even affordable housing, so “dear” to the minister of housing, Henri Kox (déi Gréng), does not find favour in the developers’ eyes, regardless of the fact that they are excluded from it. “At €8,300 per square metre in Kirchberg, can we talk about affordable housing? My friends in Brussels tell me that €8,000-€9,000 is the price of luxury in Brussels, and I tell them that it is the price of affordable housing here.”
The audience laughed, but cynically. The sector believes it has a lot to contribute and is impatiently waiting for the minister to come back, in two or three weeks, with some concrete ideas.
Between the 15.9% rise in construction costs, obvious recruitment difficulties, cash flow problems and the risks of bankruptcy, the sector is aware that it will have to modernise and explore all possibilities: from new construction techniques to the financing of hybrid modes of housing to fiscal questions, but also the easing of access to land and construction. Or even extending the duration of credit from 20-30 years to 60 years, as in Switzerland.
This story was first published in French on Paperjam. It has been translated and edited for Delano.