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Mortgage debt of Belgian households increased by half in the last 10 years

Brussels, Belgium - 10 October 2019

Deloitte's 8th annual Property Index study shows that the outstanding debt per disposable income has increased by half in the past 10 years. This puts Belgium 20 percent above the European average of 74 percent.

The home loan per net income of Belgians, in particular the indebtedness per disposable income, rose significantly from 62 percent in 2008 to 94 percent in 2018. This is 20 percent more than the European average of 74 percent. Due to the continuing low interest rates and more expensive house prices, Belgians are increasingly borrowing for the purchase of a house. A number of policy measures such as the housing bonus in Flanders and a decrease in registration fees encourage this trend,” said Frédéric Sohet, Managing Partner Real Estate and M&A (infographic 1).

The National Bank of Belgium is concerned about this trend. The government recently decided, at the request of the National Bank, to temporarily increase the banks' capital buffers. It also urged the banks to be cautious when granting new mortgage loans.

Only a few countries score higher than Belgium. The Netherlands is the European frontrunner with 193 percent. Our other neighbouring countries, France and Germany, stand at ca. 65 percent.

Belgian growth remains moderate compared with other European countries

In the largest cities, such as Brussels, Antwerp and Ghent, house prices have gone up by 4 to 5 percent in 2018. The average price of new houses is approximatively €3,400/m² (Brussels-Capital Region), €3,300/m² (Antwerp), and €3,200/m² (Ghent). Prices in the Belgian main cities remain reasonable nonetheless compared with the European peaks such as the inner cities of Oslo (€7,000/m²), Munich (€8,000/m²), London (€11,000/m²) and Paris (€13,000/m²) (infographic 2 & 3).

Residential prices have gone up in nearly all European countries between 2015 and 2018. Only Italy registered a slight decrease. Real estate prices in Belgium have risen by 10 percent over this period. Belgium has thereby registered a moderate price increase compared with other European countries. The EU average over the same period amounted to 15 percent per year, and countries such as Germany (19 percent), Spain (21 percent), the Netherlands (27 percent) and Portugal (32 percent) registered a brisker growth (infographic 4). The Belgian market therefore continues to be very stable and was spared from the real estate dip that hit a number of other European countries during the financial crisis.

Despite the upward pressure on the market, we do not expect a price correction immediately. An increase in interest rates is the main risk for the real estate market. This is not expected in the short term, especially as the ECB recently announced that it would keep interest rates at a low level. Other risks are contingent on policy, such as a change in property taxes to, for example, stimulate eco-friendly development or building standards,” continued Sohet.

Residential real estate as a popular investment

In light of the low interest rates and a volatile stock market, residential real estate has emerged as a popular investment category, which further supports demand.

"This partially changes the dynamic on the Belgian market, which has traditionally been characterised mainly by owner-occupiers. We note that well situated inner-city new construction projects, in particular, are highly sought after by private investors,” said Sohet.

The hotel and student accommodation segment is also responding to this by offering formulas under which rooms are sold per unit to private investors. Furthermore, investors are riding on the co-housing trend, in particular, by renovating large dwellings and renting them per room.  

About the European Property Index

The European Property Index compares the residential real estate markets throughout 16 European countries. The study examines the most important parameters on the housing markets such as transaction prices at country and city level, rents, and trends in the mortgage markets.

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