State of the market
The housing market in Belgium.
The current economic environment is still difficult, both in Belgium and in Europe in general. Forecasts indicate a slight upturn in the economy in Belgium. Consumer and business confidence indexes show a slight recovery after a downward trend which lasted some time. Nevertheless, unemployment is still very high throughout Belgium.
Graph 1 : Confidence index (source : BNB/Belgostat)
Despite this difficult context, Belgian residential property has fared well; it has even experienced an exceptional upward turn over the past 15 years, with a slowdown in 2009, however, (caused by the sub-prime crisis) and in 2012 (caused by the economic crisis) which also continued in 2013. The housing activity index as established by notaries (‘Baromètre des Notaires’ – Notaries’ Survey) also shows a slight slowdown in the provinces and a quite stable situation in the Brussels Capital Region.
Graphs 2 : Changes in the Belgian housing market (source : SPF Finance)
The traditional factors which supported and contributed to the stability of the Belgian residential market over the past few years were the following:
- Belgians have always been keen to become home-owners, and the country has an exceptionally high rate of property ownership. With 70% of the population being home-owners, Belgium has the leading position in Europe. Property is considered as a safe investment, a shield against inflation and a guarantee against financial uncertainty, and for the large majority of Belgians, it is a fundamental part of their pension.
- Thanks to the public sector which has an important role in Belgium, the market has experienced stability in terms of income. Moreover, Belgians' purchasing power has been maintained, thanks to the indexation of salaries. In years to come, this stability factor may be undermined in a context where both States and companies are being forced to reduce their costs.
- Transaction fees are still very high in Belgium, which limits market liquidity and strengthens its stability even further.
- The population is growing in Belgium and more specifically in the Brussels Region, where growth of over 12% by 2020 has been forecast. There is also a very high demand for smaller homes for smaller households, which is linked to the ageing population, among other factors.
The exceptional factors supporting price dynamics are the following:
- Interest rates, with an average lower than 3.5% on new property contracts, are at a record low. Low interest rates may also lead to rising prices on the housing market, causing an increased use of mortgages. However, loans do not follow changes in property prices precisely, particularly due to a more restrictive loan policy applied by banks.
Graph 3 : Belgian residential market (source : BNB / SPF Finance)
- The increasing number of foreigners with higher purchasing power has been a considerable help to supporting certain segments of the residential market in Belgium and more specifically in the municipalities located in south-west Brussels.
How will property prices change? The residential market is definitely under pressure with a rather downward trend, and in the best of cases, stability in property prices:
- The economic environment will still be difficult for a few years, which will affect the purchasing power of Belgians.
- More indebted States will continue applying a cumbersome and restrictive fiscal policy.
- Today banks are more wary. It is getting more difficult to obtain a loan, with a larger share of equity required, currently an average of over 30%.
Graph 4 : Changes in the amount borrowed (source SPF Finance / UPC)
The housing market in the Brussels Region and the two Brabant
The housing market in Brussels has seen a significant upward trend in recent years.
Prices have even risen higher, thanks to two major factors:
- Population growth is particularly high in the Brussels Region where we expect to see an increase of over 12% by 2020, according to the Bureau Fédéral du Plan (Federal Planning Bureau).
- The increasing number of foreigners (French tax refugees, European civil servants, etc.) with higher purchasing power has contributed hugely to supporting certain segments of the Brussels residential market.
More recently, however, there has been a brake on demand in some segments of the residential property sector which is reflected for example by a downward trend in prices for some villas in the two Brabant regions.
Graph 5 : Changes in Brussels housing prices per category (Source SPF Economie)