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Brexit Bankers May Find Home in Luxembourg's Red-Light District

Updated on
  • City center is hotspot as commuting times mar suburban life
  • London bankers can’t expect to upsize as prices keep rising

A pedestrian passes the offices as construction cranes stand beyond in Luxembourg

Photographer: Jasper Juinen/Bloomberg

Luxembourg’s red-light district could soon be a home for bankers escaping Brexit.

As the Grand Duchy prepares to welcome financiers relocating from the U.K., a lack of housing has pushed the price of relatively modest family homes beyond the 1 million-euro mark ($1.2 million).

That’s led to edgier areas being developed to keep up with demand, according to real estate brokers in the tiny country, attracting City of London firms looking for a foothold on the continent.

“These days, all neighborhoods in Luxembourg are being explored,” said Julien Pillot at estate agency Inowai SA. That includes the seedy area of the nation’s capital dubbed Luxembourg city’s answer to the Bronx.

One luxurious project called “Soho” has sprung up around the rue de Strasbourg, which is slowly shedding its former reputation as a cut-throat no-go-area populated by drug pushers and pimps.

The Soho development on Rue de Strasbourg.

Photographer: Stephanie Bodoni/Bloomberg

Fifty-seven flats out of about 150 in total are planned to be ready before the summer, according to the project’s website, which features busy young people walking with their children and others driving Lexus, BMW and Mercedes cars. About 70 percent in the first project have already been reserved, with a handful of two-to-three bedroom options still up for grabs for between 566,814 euros and 869,734 euros.

Just around the block, ING Luxembourg SA recently took over most of the office space in another major project right opposite the train station that was finalized in 2017. It includes 31 apartments where some of its staff will be housed.

Luxembourg has already become the nation of choice for several insurers, funds and banks relocating from the U.K. as it prepares to leave the European Union. Insurance giant American International Group Inc., U.S. insurer FM Global, RSA Insurance Group Plc and Lloyd’s of London insurer Hiscox Plc, as well as private-equity firm Blackstone and asset managers such as M&G Investments, have all chosen Luxembourg as their new EU hub. JPMorgan Chase & Co. also plans to move some London-based bankers to Luxembourg.

Luxembourg is trying to convince at least two more global insurers to make their post-Brexit home there after also attracting Sompo International Holdings Ltd., Nicolas Mackel, the head of financial lobbying group Luxembourg for Finance, said in an interview in Paris. The nation can increase its financial workforce by 7 percent from Brexit-related moves, he said.

The EU and U.K. this week reached an agreement for a 21-month transition period that’s due to start on Brexit day in March next year with the two sides also hailing progress on the broader withdrawal treaty. Brexit Secretary David Davis said a good deal was now closer than ever.

In all, Brexit could create an additional 3,000 jobs in Luxembourg, with a growing number of companies expected to set up their new EU base there -- adding to the demand for houses and apartments.

If sharing the streets with drug pushers and pimps doesn’t appeal, there are other options in Luxembourg city, the nation’s capital. But none is cheap.

The most coveted and most expensive districts of Luxembourg city are Belair, Limpertsberg, Merl and Kirchberg, just a bike-ride or even a walk away from most offices, shops and restaurants. Homes, even the occasional “maison de maitre” 19th century town house, can easily cost more than 2 million euros for at least four bedrooms.

“Prices keep increasing,” said Angelique Sabron of brokers JLL Residential. A million euros might just be enough to buy a new house near the city center, and in the city’s most coveted areas it will pay for a two bedroom flat at most, brokers said.

The upward trend in Luxembourg contrasts with London, which has seen a Brexit-fueled downturn in its sky-high rents and property prices.

The nation’s housing prices rose 4.9 percent in the last quarter of 2017 from a year earlier, according to statistics published by Luxembourg’s Statec in February. The average price for a house is just under 650,000 euros. This rises to about 1 million euros for a house in the center of the country, roughly double of what a house would cost in the north.

The trend is pushing more and more people away from the city, even across the border to nearby France and Germany, where cheaper and spacious housing is still available. It comes at the cost of a nightmarish commute.

Semi-detached house in the Limpertsberg neighborhood of Luxembourg City.

Source: Inowai Residential SA

While Luxembourg’s housing ministry dismisses the idea of a housing crisis, it recognizes the growing pressure on prices as a result of the nation’s attractive position as a financial-services center. The net number of people moving to Luxembourg is growing by about 13,000 people every year, according to Jean-Paul Marc, first government counselor at the housing ministry.

“That corresponds approximately to 6,000 new homes needed per year and this is what we’re in the process of catching up on,” said Marc.

Luxembourg has long-term plans for its city -- where it sees the biggest housing challenges -- to make life more enjoyable. The train station area is cited as part of this redevelopment plan, with zones in need of “urgent action.”

Other towns just outside the city have also been growing in price, with the arrival of new schools, and the chance to get a patch of garden with a house.

A four-bedroom house in Strassen is typically put on the market for about 1.3 million euros, compared with an average of 1.2 million euros in the city center, according to the Luxembourg Institute of Socio-Economic Research.

Such areas “are in high demand because they offer everything a family is looking for: shops close by, a good quality of schools, good transport connections and proximity to their place of work,” said Elodie Gesquiere-Rouyer, account manager at JLL.

Back in the city, local police offer some reassuring words for would-be residents of the rue de Strasbourg, which, despite a big choice of fast-food outlets and bars, is still a magnet for drug-addicts and men on the look out for prostitutes.

It could change with time, said Marc Schroeder deputy head of group of the approximate 30-officer police force in the area.

“It’s not that it’s dangerous, you just have to be a bit careful,” said Schroeder. “But it’s true that you’ll find weird people here.”

— With assistance by Fabio Benedetti Valentini, and Andrew Blackman

(Updates with EU-U.K. accord on Brexit transition in 10th paragraph.)
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