The CEO of Eurocaution does not mince his words. In fact, his position gives him a global view of the real dysfunctions in the sector… The man smiles and readily argues: “Luxembourg is lagging behind in terms of modernisation and paralysed by too many opinions and… too little action. The solutions exist, what’s lacking is political courage and speed of execution.”
To shed some light on his statement (which is certainly not his first) and his opinion on the current situation, Alessandro Rizzo explains his role: “At the heart of the property sales chain (residential and offices), there is a link that remains unknown, which comes into play at the decisive moment in the transaction. That’s precisely our role, and it involves protecting the buyer against the major risk of the developer defaulting, which can lead to heavy financial losses (unfinished site, compromised repayments, etc.). This interface position also gives a holistic view of the entire ecosystem (developers, builders, architects, engineers), and therefore of the real bottlenecks.
The first is that of public debate: many observations, few solutions. Lawyers expose the risks, banks reassure, communicators comment but… operational decision-makers and ‘risk managers’ are rarely put at the centre, even though the survival of the economy depends on concrete and rapid responses.”
Alessandro Rizzo’s idea would be to broaden the profiles interviewed. Rather than hearing the same institutional voices over and over again, he would like to give the floor to entrepreneurs and developers who are less in the media spotlight, but who are just as capable of putting forward proposals on the ground. Moreover, the repetition of the same speeches and observations has not, to date, awakened awareness or led to the emergence of compromises…
The CEO of Eurocaution also notes a more structural point: the crisis stems from a land cost that has become excessive, distorting the valuation of property. Given the current high level of stock, the prices quoted no longer correspond to what a buyer would actually pay if he were to resell. As long as this stock is not cleared, the market will get bogged down; and if the banks end up selling these assets at a discount, institutional investors could buy them up, build on them and give priority to letting them out, with harmful lasting effects on access to housing.
Furthermore, as is often pointed out, tax measures alone (e.g. on VAT) are not enough (and may above all relieve the banks rather than the end buyer). The challenge would be to make aid conditional: encourage the purchase of new energy-efficient housing by first-time buyers (subsidised rates, interest-free periods, zero-rate loan-type schemes), temporarily frame certain rights and make the rules strict and verifiable to avoid windfall effects.
Finally, the fifth priority is to act on the future to prevent prices from soaring again. This means reforming the rules (particularly around sales in the future state of completion), capping the share of land in the final price, speeding up permits and PAP, and above all aligning the interests of everyone (buyers, investors, developers, banks, the State and local authorities).
“Without the political courage to reduce certain margins, modernise obsolete laws and overcome local blockages, standing still is likely to cost more than reform,” stresses the man.
The action plan proposed by Alessandro Rizzo aims to get trading back on track without subsidising inaction. Here is a summary of the possible action plan.
His proposed action plan
1. Clear stock and unblock the market
- Temporary measures (approximately three years) to clear stock
- Targeted reduction in VAT on new build
- Relief, or temporary suspension of registration fees for projects already approved
- Obligation for developers to really lower their prices to access this aid
- Facilitate bridging loans (valuation by experts, loan up to 80%, sale mandate outside the auction, risk cover via insurance/State)
2. Really help first-time buyers (and not the banks)
- Interest-free or ultra-low interest loans for the first few years
- Schemes reserved for high-performance new housing
- No aid for older housing (energy-intensive)
- Access possible without a deposit, but with a capped cost of credit
3. Force land adjustment (the heart of the problem)
- Amend the law to cap the share of land in the final price
- Freedom to sell for more…. but without buyers
- Mechanically devaluing land
- Forcing greater densification to make projects viable
- Taking land out of the buildable perimeter if it has been blocked for too long
- Getting banks and developers to contribute
- Lowering bank margins on housing loans
- Impose an effort on developers’ excessive margins
- Aid reserved for “normal” projects, not ultra-luxury projects
- Possible tax compensation for banks, but clear quid pro quos
4. Putting investors back at the heart of the game, but subject to conditions
- Strict compliance with the 5% cap on rents
- High energy requirements
- Fewer automatic tax benefits (dep, interest)
- Aid concentrated on goods actually in stock
5. Public housing: stop half-measures
- Affordable housing must be predominantly rental, not sold
- Stop “cut-price” long lease arrangements
- The State must borrow directly (guaranteed housing bonds)
- Build massively for social renting
Alessandro Rizzo hammers it home: “Enough of observations, time for solutions. We urgently need to mobilise on several levels: economic, state and social, because without rapid reforms and political courage, the current stalemate will be dangerously prolonged.”
