Essay

Expats first arriving to Luxembourg historically tended to locate to the capital city or surrounding locations--renting first and then, at least for those planning to stay over a longer term, trying to buy, with a preference to be as central as possible.

That’s according to Julien Licheron, research fellow in urban development and mobility at the Luxembourg Institute of Socio-Economic Research (Liser), who also served as the national coordinator of the Housing Observatory from 2009 to 2018.

“But it’s clear now that prices are that expensive that they also see changes, they also now try to locate in less central areas to have a house instead of a flat and to have more space,” he explains.

Of course, it’s impossible to speak about Luxembourg’s real estate market without discussing the staggering costs where, as he puts it, “you have to envisage that you need at least €1m to buy something”. But has the health pandemic impacted regional trends at all? And if so, how?

Geographical diversification For real estate services company JLL Luxembourg, it’s clear: geographical diversification in the residential market is underway, as both investors and private buyers are increasingly demanding not just on the capital’s outskirts, but farther afield, particularly in the north.

Residential agency director Robby Cluyssen says that, although the core of JLL’s business is commercial (offices and retail), residential is “becoming a bigger part in the near future, due to the pandemic… We saw investors, especially institutional investors, seeking some other assets--too much exposure on offices, retail parks, etc. And they saw that residential assets were quite resilient.”

He’s convinced that other trends emerged from the pandemic too. “Everybody needed some outside space. The balcony, the terrace were becoming more important, so developers saw this as an opportunity… this was immediately initiated during the first lockdown and continued.” They thus foresaw the need for balconies or terraces, even shared areas in communal residencies.

Sarah Gomes is one such individual who opted to move to northeastern Luxembourg. She had formerly been living in the south, commuting to Luxembourg City for work. Recently married, she and her partner purchased in Diekirch, although they’re eagerly awaiting the premises to be finalised (another result of the pandemic). For now, they’re living with her partner’s parents, but she doesn’t mind--she can walk to her new workplace, Nordstad Entwécklungsgesellschaft, an organisation helping to facilitate development of the Nordstad. It’s the less stressful commute and proximity to nature she most appreciates.

Jessica Gaspar also purchased a home during the pandemic, although not as a result of it. The Betic communication officer had previously been renting in Luxembourg City but now is a happy homeowner in Differdange. While Cluyssen says schools are a main driver for location, this was not the case for Gaspar--for her, it was cost. She and her partner were able to buy a home that checked off their boxes, which included being easily connected to the capital via public transport and having shops and services within reach.

Figures released by atHome in autumn 2021 show the north is “favoured by families and residents looking for large spaces [and] the least expensive region of the grand duchy”. The south is slightly trailing the centre in terms of number of ads, “explained by lower prices than those found in the centre of the country, and by municipalities that appeal to residents: Differdange, Pétange and Esch-sur-Alzette.”

“Luxembourg remains the engine”, but… JLL observes that buyers are indeed attracted not just by the better prices outside of Luxembourg City, but also due to the larger housing surface areas. The difference between the national average and the capital average selling prices, in fact, has increased over the last decade, “a development which is accentuated in 2021”. This difference equates to €3,765/m2 that year, compared to €835/m2 a decade prior. For investors, it adds, a property’s rate of return can also be better on the outskirts than in the centre.

This is in line with what Licheron has observed. “Prices increase[d] almost everywhere in the country--not only in Luxembourg City, but also in the surrounding municipalities and in the northern and eastern part of the country.”

But he adds that the pandemic isn’t necessarily driving that change--“it was already something we were able to see just a bit before, perhaps in 2018-19.”

Inowai CEO Jean-Nicolas Montrieux says the capital “remains the engine of the Luxembourgish real estate market”, adding that for employees coming to Luxembourg for work, “they are more attracted by capital cities… it’s a trend from 30 years ago, and it will not stop in the coming years, despite the pandemic.”

He believes the “future is in the cities”, adding that for those who are hired from other cities in Europe, “those people who have been educated, grew up in big cities, won’t live in the countryside.”

Even so, he adds that more than half of the apartments its agency sold last year were in the southwest, around

MARKET SHARE PER REGION

Sales price trends for houses and flats in Luxembourg regions, March 2021-August 2021.

Source atHome

16% Houses

27% 4% 11% Flats

11%

14% 33% 44%

32%

REGIONAL PRICE VARIATION

Sales price trends of houses and flats in Luxembourg regions, compared to national average, March 2021-August 2021.

Source atHome

Centre

+37% +44% -29% -22% North

-18% -19% South

Houses Flats East

-2% -10% West

+5% +4%

Esch-sur-Alzette. “There are a lot of shops, public services, transport, etc., and it’s not far away from [Luxembourg] City,” he adds.

Although he says he did see cases with people wanting to move to a larger home in the countryside during the pandemic, “I think it’s not a big trend in the market. It’s certainly an effect of the pandemic, [but] I think it will not change the real estate market in the coming years.”

Cluyssen anticipates the north will be a “big player” in future, with projects such as “Wunne mat der Wooltz”. The new district in Wiltz will span over 25ha, able to accommodate approximately 1,800 inhabitants. “That’s something that’s going to change the whole region,” he adds. “It will be a big change and challenge, as well [for] infrastructure and providing schools, crèches, etc.”

Future living For many seeking to buy, asking prices can be staggering, and potential buyers are questioning the real value of a home.

“We should definitely look into the asset of housing,” Cluyssen says. “What do we build actually? What is a house? We have so many generations, cultures living here in Luxembourg… so many differences that we should also look into the difference of how we house these people.”

Co-living, for example, could be an option appealing to the expat or millennial segments. He predicts “hundreds of rooms” coming to the market over the next couple of years. Another option could be tiny houses, for which there is already a blooming community in Luxembourg. Cluyssen continues: “We’ve got land available. People aren’t willing to sell it. Fine, don’t sell it. But put it to use, get some rental income on it… build some tiny houses, each with a small garden, because that’s also part of demand, and something that came from the pandemic.”

For Montrieux, on the other hand, tiny homes are a “little bit touchy, because we’re not going to create a ‘cité ouvrière’ [working-class neighbourhood]. We have to avoid making another category for people who can’t live in another house.”

Given how the Inowai CEO sees Luxembourg City as remaining the “engine of the Luxembourgish real estate market… and the workforce is growing”, he tends to agree with the likes of people like Olivier Bastin, Immobel Luxembourg CEO, on the need for densification there. As Bastin proposed in a Paperjam + Delano Club event in Q4 2021, “Densification is an answer to the environmental crisis. If we move towards taller buildings, then less surface area is used.” ness of the territory when we compare to Paris, London,” Licheron explains. “Now it’s really different because prices in Luxembourg are not that different from London or Paris.” He adds that if the increase in properties doesn’t stabilise--if prices increase, for example, by 13% over the next one to three years--“it will become a very important problem in terms of attractiveness.”

Of course, the prices in Luxembourg impact those in parts of the greater region too. Licheron adds that Liser is trying to develop a cross-border housing observatory to better understand some of these trends.

Montrieux sees opportunity in the grand duchy, however, in getting the private sector more involved. “The Luxembourg government has worked on this topic for 10 or 15 years, and there is absolutely no result,” he states--adding the caveat that it isn’t necessarily because they are making bad decisions, but other avenues could and should be explored. “In my opinion, there is a big opportunity to ask the private sector with a frame[work], to deliver the dwellings the country needs. It’s only this question.”

Keeping Luxembourg attractive But all of the interlocutors agree on one thing: improving the housing situation will be critical to keeping Luxembourg attractive. “Housing prices were probably the positive aspect of the competitive-

Bernard Eresch (left), Head of Banque des Industries at BIL, and Luc Provost (right), CEO of B Medical Systems

TECHNOLOGY AND INNOVATION

B Medical Systems goes international with BIL

This Luxembourg company specialising in the design and production of advanced medical refrigeration equipment is experiencing rapid international growth. Banque Internationale à Luxembourg (BIL), its partner since 2016, is supporting this growth with advice and tailored financing solutions throughout the life cycle.

Last November, at a virtual summit between India and Luxembourg, Xavier Bettel informed his Indian counterpart Narendra Modi about the expertise of Luxembourg-based company B Medical Systems and its ability to help him meet the health challenges of this country of 1.4 billion inhabitants. “After that, everything moved very fast. In December, a delegation went to India to finalise important partnership agreements. In order to meet demand, it was decided, among other things, to set up an on-site production and logistics facility. This strategic choice will reduce unsustainable cross-border transport and create new jobs,” explains Luc Provost, CEO of B Medical Systems.

One mission: saving lives

Based in Hosingen since 1979, the business initially grew up within the Electrolux and Dometic groups. In 2015, following the takeover of B Medical Systems by an institutional investor expert in this field of activity and greater empowerment of senior management, B Medical Systems became independent. To date, the company has supplied more than 500,000 medical cold chain units

“With BIL, we have a true partner who understands our needs and responds quickly.“

Luc Provost CEO of B Medical Systems engineers at the time. There are now 30 of them. A hundred products have been developed and 120 patents registered.

Seizing new opportunities

The COVID-19 crisis has accelerated business growth. “The international contacts made during this period have opened up new long-term perspectives and created new sustainable opportuni-

>300

At its current rate of expansion, B Medical Systems has considerably increased its workforce to reach a number of more than 300 employees in Luxembourg.

ties,” the CEO continues. “In addition to increasing demand, the partnerships formed also give us easier access to new skills that will help us grow.” Since 2021 and following the development of the company, B Medical Systems has over 300 employees in Luxembourg. Its recruitment prospects are growing.

Supporting international growth

This development requires significant financing to adapt production equipment, to commission this new site in India which will employ about a hundred people, and to reorganise the supply chain. In addition, provision is being made for international

Expertise

“With the aim of supporting B Medical Systems throughout its life cycle, both locally and internationally, we provide extensive expertise in consulting and financing. Our entrepreneurial culture allows us to understand the needs of the company. Moreover, the business of B Medical Systems is part of our strategy to transition to a sustainable bank.We engage with our employees to transition towards sustainable banking, conscious of our responsibility and willing to develop products that allow us together with our clients to have a positive impact and to prepare sound grounds for future generations. To underline this commitment, BIL has signed the UN’s “Principles for Responsible Banking”.

Bernard Eresch

Head of Banque des Industries

entities within the group to carry out recycling/ retrofitting of products to support their sustainability efforts, in particular ESG criteria. “One of the challenges, in a competitive global context, was to

be able to react quickly to demand,” explains Luc Provost. In this context, BIL was able to respond to each of our needs and showed real speed of execution to enable us to meet each challenge. This is what we expect from a bank, that it acts as a genuine partner.”

to over 140 countries worldwide. “Using an innovative approach, we seek to save lives by offering stateof-the-art equipment that can guarantee the preservation of vaccines and treatments, or ensure their traceability in all contexts,” explains Luc Provost. Since 2016, relying on BIL’s advice and financing solutions, the company has experienced sustained growth. The innovation team consisted of four With the help of market experts, we are committed to developing bespoke products and innovative solutions that meet the needs of large companies, SMEs, professionals and self-employed alike.

www.bil.com/entreprises