Luminous does seem to have problems, but I think the reason why KHIII switched to UE4 is mostly about the fact that the Luminous team has been absorbed to the FFXV team completely and are super busy helping them finish FFXV, so the Osaka team does not have the technical support that they'd need for KHIII's development until FFXV is finished. They can't wait that long unless they want to delay its development until then, so since SQEX have the license for UE4 and Epic have improved their tech support for UE, it makes sense to ditch Luminous in favor of an engine that they will get proper support NOW instead of 1-1,5 years from now.