Economy & Politics

Real estate gives the CSSF a cold sweat

With loans representing, on average, three-quarters of the overall price of an acquisition, households in the Grand Duchy find themselves exposed to any fluctuation in the market, according to the gendarme of the Place. Data which only concerns 2019, and which therefore excludes the effects of the pandemic.

Jean-Michel HENNEBERT

Jean-Michel HENNEBERT

With loans that represent, on average, three-quarters of the overall price of an acquisition, households in the Grand Duchy find themselves exposed to any fluctuation in the market, according to the gendarme of the Place. Data which only concerns 2019, and which therefore excludes the effects of the pandemic.

Published last Friday, the CSSF’s annual report, the real estate issue in the Grand Duchy thus takes on a new dimension. includes, for the first time, unprecedented data on the real estate market. In this case those related to the weight of credits dedicated to the acquisition of a good in the household budget. Detailed in a series of new indicators resulting from the recommendations of the European Systemic Risk Board, the real estate issue in the Grand Duchy thus takes on a new dimension.


The Grand Duchy makes a grand entrance in the ninth study of property in Europe published by Deloitte. While Luxembourg-City is at the top of the price ranking for new housing, Esch-sur-Alzette and the Cité du fer are in the top 10 cities with the highest rent.


Thus, in 2019, the household borrowing rate, ie the ratio between the loan granted and the value of the property acquired, stood at “around 75%” on average. In other words, “households have borrowed three-quarters of the total purchase price of their new property,” says the gendarme of the financial center. Upward trend, since “the loan-to-value ratio was greater than 90% for around a third of new loans”, specifies the CSSF, indicating that the total volume of new loans granted by Luxembourg banks reached 3.1 billion d euros in the second half of 2019.


Luxembourg Times, Wirtschaft, neues CssF Gebäude, Claude Marx, neuer Generaldirektor, Foto: Anouk Antony / Luxemburger Wort

The Luxembourg financial policeman makes this recommendation to credit institutions until October 1, following the example of the ECB. Objective: maintain a sufficient level of liquidity and allow their customers to be credited.


It should be noted that while the majority of new loans (52%) granted were on the basis of variable rates, fixed-rate loans have attracted more and more people. And this, in a context marked by the growing need for financial security for future owners. A data that should become even more important in the future, in connection with the threat hanging over thousands of jobs due to the impact of the covid-19 pandemic on the economy.


Mit neuen Hilfs-Krediten ist nicht jedem Unternehmen gedient - auch den Banken nicht, deren normal Kreditgeschäft wegen der Rezession eingebrochen ist.

Despite the arsenal deployed to fight the crisis linked to the covid-19 pandemic, finance professionals are calling on the state to step up efforts to save ailing companies.


A risk that Pierre Gramegna (DP), Minister of Finance, should address within the Systemic Risk Committee, a body officially responsible for “helping to maintain the stability of the national financial system”. According to our colleagues from Report, the entity which brings together the highest representatives of the Ministry of Finance, the Banque centrale de Luxembourg, the CSSF and the Commissariat aux assurances is due to meet behind closed doors next Monday. This meeting could then emerge from a series of recommendations aimed at tightening the conditions for granting loans granted by local banks.

For the record, the increase in property prices in the Grand Duchy is well above the European average, reaching 14% in the first half of 2020. Against 5.5% at EU level, according to the latest Eurostat data available. A phenomenon that prompts some to question its origins, since the growth observed over the past three years “is not justified by the fundamentals of the economy alone.”


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