Fleeing bankers may find Luxembourg an acquired taste
LUXEMBOURG — Little Luxembourg is luring firms on the lookout for a post-Brexit foothold in the European Union, from JPMorgan Chase & Co. to insurance giant American International Group Inc.
While many find the Grand Duchy a multilingual paradise, would-be expats are being warned not to expect the cosmopolitan lifestyle they currently enjoy in London and that they should prepare to spend long hours on clogged roads.
“It will be crazy,” said Jose Pedro Fernandes, a 56-year-old taxi driver, who moved to Luxembourg from Portugal 15 years ago and earns a living transporting financial workers around the jammed capital that lacks a subway and suffers from inadequate bus services.
Traffic congestion has become “unbearable,” according to Fernandes, because of construction sites everywhere to create a new tram line and a wave of new office buildings that can be seen popping up in and around Luxembourg city, the capital of by far the EU’s richest state.
AIG in March said it will open an operation in Luxembourg following the U.K.’s vote to leave the European Union. U.S. insurer FM Global and Lloyd’s of London insurer Hiscox Plc., as well as private equity firm Blackstone also chose Luxembourg as their new EU hub. JPMorgan this month said it plans to move hundreds of London-based bankers to expanded offices in Luxembourg, Dublin and Frankfurt.
Culturally and socially, Luxembourg has been trying to adapt to the growing demands of its wealthy population and a likely influx of financiers from the U.K. capital. Celebrity artists now regularly pay a visit and, unlike in bigger cities, it’s still easy to snap up a ticket for shows.
Well-paid bankers and their families won’t starve. What Luxembourg lacks in sandwich bars it makes up for with 11 Michelin starred restaurants often serving regional delicacies such as black pudding and liver dumplings washed down with Pinot Gris.
Still, Luxembourg is light years behind London when it comes to things to do and places to hang out. The U.K. capital was last year ranked best city in the world for quality of life, ahead of Paris and New York, in a PricewaterhouseCoopers survey.
“There’s no atmosphere in the city in the evening,” said Chris Edward, U.K. country manager at Lombard International Assurance, who, nevertheless, says he likes being one of the 590,000 people crammed into the EU’s second-smallest nation.
Luxembourg’s houseprice index in the second quarter of last year grew by 5.6 percent from the previous year, according to the country’s statistical office Statec. In 2016, the average price for existing apartments was 4,613 euros ($5,165) per square meter, and 594,379 euros for a onefamily house.
The data don’t show the full picture, since high- quality family homes with two or more bedrooms close to Luxembourg city, are priced at or above a million euros.
Not in the same pay league as many of the new wave of immigrants, Fernandes, the taxi driver, can’t afford to live centrally anymore. His home now consists of a room in the northern town of Clervaux, more than an hour’s drive away from the center.
While renting or buying a house in the center costs too much for many, others who crave a bigger place in the countryside must also pay a price — a tortuous journey from neighboring Belgium, France and Germany. That means dodging long lines of Porsche 911s and Audi station wagons is already a daily ritual for the hordes of white-collar workers.
Benoit Wtterwulghe, the chief executive officer of ABLV Bank Luxembourg SA, is one of a constantly rising number of 177,000 people commuting in and out of Luxembourg every day.
“We are only a few hundred meters from the border, but the price is 10 times cheaper,” he said. “It’s quite tough with all the traffic jams. Sometimes I leave very early, but you need to cross the border before 6:30 a.m. Or, I start to work from home and get in a bit later.”
Even though no one knows exactly how many people will head to the nation, Luxembourg for Finance, the agency for the development of the financial center, estimates that Brexit could create some 1,000 local jobs. According to realtors, prices are already under pressure due to current demand exceeding supply.