A Boost

The seven housing measures presented last Thursday by Luxembourg's housing and finance ministers are being welcomed by the construction sector as a step in the right direction. Their main objective is to revive residential construction, though industry representatives say additional reforms will be needed to increase building activity and address the country's housing crisis.[1]

The numbers explain the urgency. Over the past 18 to 20 months, demand for new housing has collapsed. Barely 1,000 units per year have been built, compared to around 4,000 before the crisis. According to STATEC, about 6,500 units per year would need to be constructed to meet demand. The gap between what is being built and what is needed is more than fivefold.[1]

What the Measures Do

Anyone buying a new build, whether apartment or house, will benefit from additional tax measures: exemption from registration fees when purchasing off-plan (VEFA), reduced notarial fees, and increased interest subsidies, especially for young families. The Bëllegen Akt has been raised to 45,000, and VEFA purchases now carry 0% registration duty.[1]

Roland Kuhn, President of the Federation of Construction Companies, noted that accelerated depreciation, if guaranteed, and the 8% VAT rate are very important aspects, even if certain details might still need adjustment. Steve Vermeer, spokesperson for the Federation of Real Estate Developers, reckons the measures are mainly targeted at private buyers and would have hoped that legal entities, including institutions, foundations, and companies, would have been considered, since many of them also purchase property.[1]

What Still Needs to Happen

Kuhn argues that procedural changes, both in terms of time and quality, are required. The Federation of Construction Companies is drawing up a list of improvement points together with the Federation of Craftworkers. Single-family homes around the one-million mark are "pretty much the maximum that most people can or want to afford." Purchasing power has decreased, and Vermeer suggests focusing on constructing smaller apartments, as buyer behaviour is constantly changing.[1]

One approach is to reform the guarantee of completion, which comes into play in the event of a developer's bankruptcy. Kuhn explains that to build trust in buildings under construction, a guarantee of completion that includes the land is required. Without it, buyers remain wary of off-plan purchases, and the entire VEFA pipeline stalls.[1]

Last Thursday, the government announced seven measures and 300 million in state purchases. Today, the construction sector says: good start, more needed. The gap is 5,500 units per year. The measures address demand. The sector is still waiting for supply.[1]