Housing: timing and luck

Gregory Kennedy

7 juin 2023

To give me a better life than they had, my parents helped me develop a strong work ethic and invested heavily in my education. Just like them, at the age of 30, I bought a 4-bedroom house suitable for raising a family in. Their investment paid off.

If only this was true.

Education

My parents moved from Ireland to Luxembourg in the 1980s. Even though they did not receive a higher education, they were quickly able to find jobs and subsequently buy a house and raise a family. I wish I could do the same.

They went a step further by ensuring that my siblings and I received a higher education. After 4 years of study in Barcelona I obtained a bachelor’s in business administration, and I subsequently studied 2 years in Lisbon to earn a master’s in finance.

Hard work

When I was not studying, I was working.

Growing up, I had a plethora of house related chores to complete on a regular basis. This could range from helping to clean the house, mowing the lawn, and collecting wood from the forest. From the age of 15, I also spent every summer doing summer jobs at restaurants, offices, etc.

Education and hard work were supposed to pay off.

In our society, a strong work ethic is virtuous, it gets you places:

“I do not know anyone who has got to the top without hard work. That is the recipe. It will not always get you to the top, but it should get you pretty near.” Margaret Thatcher, former British Prime Minister.

Regarding housing, this belief is nonsense. I cannot even get on the housing ladder, let alone the top.

Journey

Due to luck, work and education my salary is in the top 20% in Luxembourg, yet I have not been able to get on the housing ladder due to a lack of capital. The reality is that your salary is not the key factor when searching for a house, it is all about how much capital you have access to.

I went to the bank for a 500.000 EUR mortgage to buy an apartment, the bank requested a 20% down payment, which meant that I needed 100.000 EUR. I save around 1.500 EUR a month, well above the average, yet at this rate it would take me 6 years to save up for the down payment.

I am 36 and I have been professionally working for about 12 years now. When I started working, I was only able to save around 500 EUR a month. So, on average I have saved less than 1.500 EUR. This means that I would need to save for closer to 10 years (and do nothing else with my savings) to have 100.000 EUR for the down payment.

This is completely unrealistic.

Reality

The reality is that my dream of getting on the housing ladder in Luxembourg is pretty much over without the capital I need for a down payment. Those getting on the housing ladder are getting help, in the form of capital, usually from their families. There are few other ways.

In many cases, families have been able to provide this capital by leveraging or selling their family home. The astronomical increase in house prices means that a home bought decades ago has made them wealthier than their job ever could have. It is not about hard work; it is about timing and luck.

I remain hopeful though, it is election year and many promises on housing have been made, let us see if they are kept.

Gregory Kennedy is a columnist for Investment Officer Luxembourg. His columns appear on Wednesdays. He also works as business development manager at Finsoft Luxembourg.