Deloitte Property Index - Overview of the European residential property market
How much residential surface area can Europeans buy for € 200,000?
The Deloitte Property Index has revealed that the average price of residential property in Belgium remains consistently in line with European averages.
Brussels, 12 July 2016 - The Deloitte Property Index, which provides an overview of the European residential property markets, has revealed that the average price of residential property in Belgium remains consistently in line with European averages.
This is the fifth edition of the annual Property Index, which compares residential property markets in Europe. The report analyses factors that impact the development of residential markets and compares prices in several European countries and cities.
How much residential surface area can the average European buy for € 200,000?
This year, the Property Index is investigating how much surface area the average European can theoretically buy with a budget of € 200,000. Apparently, the further eastwards a European country is located, the lower the price of real estate. Real estate in Spain and Portugal is also relatively inexpensive. In Hungary, Poland and Portugal € 200,000 will, on average, buy you a house of approximately 200m². In the United Kingdom and France, the average surface area available for that price is only 39m² and 50m² respectively. Belgium sits with the Netherlands and Germany in the middle of the pack, with approximately 100m². Differences are even bigger at city level. In London, € 200,000 will only buy you 11m² of residential property. In Brussels this is 69m², in Ghent 78m² and in Antwerp 75m².
The average purchase price of a home in Belgium has seen a slight increase of 1. 54%.
In 2015 the price of new homes increased in 12 out of the 15 countries included in the survey; the same as in 2014. This illustrates the current stability of the European residential property market. Similarly to last year, the strongest growth was seen in Ireland, where prices rose by 27% in total, followed by Israel (10.8%) and Spain (10.6%). After a significant drop in prices during the financial crisis, the Spanish real estate market is clearly recovering, with a price increase amounting to slightly over 10% during the past two years. The strongest drop in prices was noted in Russia, although this can be attributed primarily to the depreciation of the rouble.
Considering that the Directorate-General for Statistics of the Belgian Federal Public Service Economy has not yet published any data with regard to real estate transactions in 2015, no detailed figures are available per municipality to illustrate the evolution of residential property prices in 2015. According to the ‘Residential Property Price Index’ of the Federal Public Service Economy, the price of residential property rose across all of Belgium by 1.54% in 2015. The prices of new and existing residences rose by 4.24% and 0.63% respectively.
Frédéric Sohet, Real Estate & Construction Industry Leader at Deloitte Belgium: ‘Abolition of the owner-occupied home allowance in Flanders has therefore failed to contribute to a decrease in property prices. Thanks to interest rates being at a historic low, the number of transactions (+6.4%) and the value of the total number of mortgages (+23.5%) has even increased significantly in comparison to 2014. We are expecting this gradual increase in the price of residential property in Belgium to continue—in line with inflation—over the course of the next few years. The Belgian residential property market remains stable and was able to perform well, even during the crisis years’.
Affordability of residential property
Our study measures the affordability of residential property in each country based on the number of annual gross salaries needed to purchase a standard new-build residence (70m²). With a ratio of 3.7 Belgium, together with its neighbouring countries Germany and the Netherlands, is one of the countries where residential property is most affordable. These statistics must, however, be taken in perspective, bearing in mind the difference between gross and net wages in Belgium arising from the relatively high taxes on professional income. The country where residential property is least affordable is the United Kingdom (11 gross annual salaries).
The debt burden borne by Belgian families is at the European average
The debt burden of Belgian families (the proportion of their mortgage in relation to their available income) is one of the factors that determine residential property price increases. According to our study, families in Belgium do not build up too high a debt burden. The proportion of total mortgage debt in relation to the total available income in Belgium amounts to 83%. This is higher than in France (66%) and Germany (66%), but much lower than in the United Kingdom (116%) and the Netherlands (197%).
Healthy fundamental characteristics of the Belgian housing market
In comparison to other European countries, the real estate market in Belgium has not suffered too much during the financial crisis. Residential property prices have risen nominally by 9.3% since 2010. The risk of a serious price adjustment still appears to be limited due to the solid foundation on which the Belgian residential property market is built. We have not noted an oversupply or too high a debt burden among families. The greatest risks for the residential property market in the medium term remain an increase in interest rates and amendments to real estate taxes. An increase in interest rates appears not to be likely in the short term, but amendments to real estate tax are less predictable. Changes in taxation were implemented or announced in the three districts in 2014 and 2015, by which the tendency of government bodies to stimulate the purchase of privately owned residences seems to be coming to an end.
‘Another risk, according to us, lies in the substantial difference between demand and supply in specific locations. In the long term, we wonder if the current high yields on specific residential investment products will remain feasible,’ concludes Frédéric Sohet.