Deloitte Property Index 2015 - Overview of European Residential Markets
Belgian residential property prices show moderate increase
Deloitte’s Property Index, an overview of European residential markets, reveals that residential property prices in Belgium increased by approximately 0,5% in 2014 compared to 2013.
Brussels, 25 June, 2015 – Deloitte’s Property Index, an overview of European residential markets, reveals that residential property prices in Belgium increased slightly in 2014 by approximately 0.5% compared to 2013. While new dwelling prices in Antwerp rose by 2.9%, prices in Brussels and Ghent declined by 0.4% and 1.5% respectively.
This is the fourth edition of the annual Property Index, a comparative report regarding residential markets and housing across Europe. It analyses factors influencing the development of residential markets and compares residential property prices in selected European countries and cities.
Frédéric Sohet, Real Estate & Construction Industry Leader, Deloitte Belgium: “We expect the moderate increase of residential property prices in Belgium – in line with inflation – to continue in the future. The Belgian residential real estate market is traditionally very stable and has performed well, also during crisis years.”
The average transaction price of a new dwelling in Belgium grew moderately to €2,100 per m²
Prices for new dwellings grew in 12 markets in 2014, compared to only 5 in 2013, showing that the property market is gaining momentum in Europe. The highest growth was recorded in Ireland, where new building prices rose by an astounding 31.7%, followed by Israel (25.6%) and the United Kingdom (21.6%). Meanwhile, prices in Italy and Russia continued their downward trend. Belgium saw residential property prices rise by approximately 0.5%. At a city level, prices in Antwerp rose by 2.9%, while a marginal decrease was recorded in Brussels (-0.4%) and Ghent (-1.5%).
Affordability of housing
Our study measures the affordability of housing in each country in terms of number of gross annual salaries needed to buy a standard new dwelling (70m²). With a ratio of 3.2, Belgium is at the top of the affordability list. We note however that this statistic should be put in perspective, given the important difference between gross and net salaries in Belgium due to the relatively high taxation of labour income. Belgium is closely followed by
Germany with a ratio of 3.3. Relatively affordable housing can be found in the Netherlands (4.2), Spain (4.4), Ireland (5.2), Sweden (5.3), and Austria (5.8). The least affordable housing is found in France (8.0), Russia (8.8), the United Kingdom (10.0), and Israel (12.7).
The indebtedness of Belgian households falls within the European average
Indebtedness of households (i.e. the propor¬tion of residential debt to household disposable income) is one of the deter¬minants of house price growth. Our study shows there is no excessive debt accumulation by households in Belgium. The residential debt to household disposable income ratio is at 82%. This is above the ratios of France (65%) and Germany (66%), but well below those of UK (119%) and the Netherlands (218%).
Good financing conditions for residential real estate projects
The Property Index includes this year a special topic on the financing of residential real estate development projects. Overall, financing conditions for residential real estate development projects in Belgium seem to be more favourable than the European average. Of all countries in scope, Belgian banks apply the lowest interest margin (1.25%-1.75%) for the financing of a “standard” residential development project. Also for other indicators such as loan-to-value and pre-sales requirements, banks in Belgium are on average less demanding than banks in other countries. This confirms the stability and health of the Belgian residential real estate market.
Healthy fundamentals of the Belgian residential real estate market
The Belgian housing market has an excellent track record over the last years, as demonstrated by the nominal price growth of 15% between 2008 and 2014, despite the financial crisis. The risk of a major price correction seems limited, with the Belgian residential property market showing healthy fundamentals. No oversupply or excessive debt accumulation by households have been observed. The main risks for the property market are increasing interest rates and changes in property taxation. While an increase in interest rates seems unlikely in the short term, changes in property taxation are more unpredictable. The Flemish Government decided to reduce the fiscal advantage of the house bonus as from 2015, which caused a rush on real estate in Flanders by the end of 2014.