In a slowing real estate market, Banque de Luxembourg's Real Estate division advises and supports real estate professionals throughout their projects.
After years of extraordinary growth, the Luxembourg property market has been slowing down since 2022. Rising interest rates and inflation, along with a surge in commodity prices in the wake of Covid and the conflict in Ukraine, have contributed to a drop in demand and put many projects on hold. "The problem with this situation is that it risks damaging Luxembourg's attractiveness. The existing housing shortage could be exacerbated by the crisis we are going through," says Astrid Schlesser, Real Estate Expert Adviser at Banque de Luxembourg.
Fundamentals still solid
Despite this context, the fundamentals of the Luxembourg real estate market remain solid. The country continues to be in excellent economic health, as evidenced by its triple-A rating, recently confirmed by the rating agencies Fitch and Morningstar. Demand for housing and other real estate infrastructure remains high, which is a positive point for investors. “However, it is clear that there are a number of concerns regarding financing property projects that we must not lose sight of," says Nathalie Welbes, Coordinator of the Real Estate Division at Banque de Luxembourg. “Rising interest rates are making the loans needed to buy property more expensive, which is impacting demand. In addition, developers are faced with rising commodity prices due to widespread inflation, with consequences for their projects in the pipeline.”
In these challenging times, we keep our feet on the ground, close to our clients.Coordinator of the Real Estate Division at Banque de Luxembourg
To stay on course in these difficult conditions, the professional community has even greater need of a well-informed partner. Banque de Luxembourg has attended the international real estate event MIPIM for many years, where it seeks to identify the various movements and trends in the sector in order to provide each client with the right solutions. "As a long-term partner, we offer our clients comprehensive support. Especially in these uncertain times, we keep our feet on the ground, close to them,” says Nathalie Welbes. “Our personalised and proactive approach requires us to have a perfect understanding of our clients," adds Astrid Schlesser. “We take the necessary time, with each of them, to structure a tailor-made solution together.”
Mitigating the risks
Today, one of the bank's priorities in its daily work alongside its clients is to mitigate the risks associated with the current context. “This involves greater vigilance with regard to our clients' liquidity and their financial reserves," explains Nathalie Welbes. “It also means being well informed about their various projects and banking commitments. For new projects, we pay particular attention to the location of the property and, in the case of property development, we do not hesitate to challenge the proposed budget parameters.” The aim is to ensure that each of our clients gets through this rather troubled period as smoothly as possible.
We take the necessary time, with each of our clients, to structure a tailor-made solution together.Astrid Schlesser, Expert Real Estate Adviser at Banque de Luxembourg
By offering a cross-functional service to each of its clients, dovetailing with the bank's other departments, Banque de Luxembourg's Real Estate Division covers the entire real estate development value chain (see opposite). All underpinned by a strong commitment to CSR. "The sustainability of buildings and the well-being they offer to their occupants are essential elements in our eyes. For example, we no longer finance office buildings that do not have appropriate certifications in this area," explains Astrid Schlesser. The real estate market, although uncertain, is firmly focused on sustainability.
1. Financing real estate developments in Luxembourg
- Investment loan for the acquisition of land
- Overdraft facilities to support the project’s development
- Issuance of bank guarantees and bank completion guarantees
2. Support for real estate investment projects
- Financing real estate assets on the basis of a cash flow calculation
- Mortgage-secured real estate portfolio approach
- Interest rate hedging
3. Daily management of bank accounts
- Current accounts with electronic access and payment solutions
- Management of cash surpluses
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