Record-breaking year for Belgian residential property market in 2019: prices increased by 4 percent has been saved
Record-breaking year for Belgian residential property market in 2019: prices increased by 4 percent
Uncertainties remain regarding the impact of COVID-19 on the market in 2020 but it is showing good signs of resilience
Brussels, 24 September 2020 – Deloitte today issued the ninth edition of the Deloitte Property Index analysing and comparing residential property markets in 23 countries in Europe and beyond. Belgium experienced its most active year ever in terms of transactions. After a record-breaking year in 2018, the number of transactions rose by an impressive 9 percent (including both houses and apartments).
The Belgian residential property prices followed the trend of the previous years and recorded a notable increase of 4 percent. Especially newly built apartments in Ghent recorded a remarkable growth (+9.4 percent), prices in Antwerp increased moderately (+3.8 percent), while prices in Brussel remained stable. Rents followed a similar trend with a substantial increase in the Brussels Capital region of more than 6 percent.
While the market is showing signs of recovery following the easing of lockdown measures and apartment prices have risen, the impact of the COVID-19 pandemic is expected to end the run of several years of growth across all segments in 2020 and many uncertainties remain. Residential property markets will be affected by the economic recession. However, the situation is different from the financial crisis in 2008-2010.
2019 most active year ever on the Belgian residential market
In June 2019, the Flemish Government decided to suppress the ‘Housing bonus’ (the tax advantage of owning a house in Flanders). This was the main trigger of the remarkable increase in transactions (+9 percent) last year. In the last quarter of 2019, the number of transactions increased by 25 percent, with even a temporary peak of 122 percent during the autumn holidays, compared with the same period in 2018.
Although the National Bank of Belgium imposed more strict regulations on granting mortgage loans, with a restriction of 80 percent leverage rate for investment real estate, it did not prevent people from acquiring new property. A clear indication of the availability of cash on the savings accounts of Belgian citizens. The stricter technical and sustainability standards for rental homes further supported this trend. Necessary adaptations, particularly in older apartments in the lower segment, became a capital-intensive matter. This resulted in owners selling their properties rather than renovating them.
Ghent becomes most expensive Belgian city for newly built apartments and rental prices are rising, especially in Brussels
“We have a resilient and healthy residential property market in Belgium. It is adapting to new regulatory constraints, mobility challenges, and to new socio-economic changes. Housing stock compared to population and development intensity are in line with the European average. We now need to see how resilient 2020 will be due to COVID-19 but signs are positive and investor interest in residential investments remains high,” according to Frédéric Sohet, Partner at Deloitte Real Estate in Belgium.
Every year in the Deloitte Property Index the evolution of the residential property prices of the three biggest Belgian cities—Brussels, Antwerp and Ghent—are measured. Overall, residential prices in Belgium increased by a notable 4 percent. Rental prices followed a similar trend, with especially a substantial increase in the Brussels Capital Region of more than 6 percent where the proportion of rented apartments is also increasing.
Whereas last year the growth in prices was aligned between the three cities (between 4.4 and 4.8 percent), this year the differences are more pronounced. Ghent noted a remarkable increase of 9.4 percent, becoming the most expensive Belgian city in the sector of newly built apartments with by far the highest price growth. Antwerp recorded a price increase of 3.8 percent, slightly lower than last year (4.4 percent). Prices in Brussels remained stable (+0.0 percent), which could indicate a local oversupply of new apartments in specific areas.
Belgium has lowest price/sqm compared to neighbouring countries
The ninth edition of the Deloitte Property Index analysed 23 European countries, the highest number since the start of the Index. Four countries recorded a price decrease, 19 of them indicated a growth in prices of new dwellings. Luxembourg, taking part in the survey for the first time, assumed the position of the most expensive country to buy a square metre of a new apartment in 2019 with a price of €7,145. The eastern European countries mark the other end of the price segment with Bulgaria and Bosnia and Herzegovina having the lowest prices of €550/sqm and €849/sqm, respectively.
With an average bid price of €2,583/sqm, Belgium positions itself around the European average. Although, when comparing with its neighbouring countries, Belgium sets the lowest price/sqm just below the Netherlands (€2,632/sqm, +4.4 percent). Price increases in Germany, France and Luxembourg were more than double and triple the increase of Belgium resulting in €3,727/sqm (+9.5 percent), €4,523/sqm (+12.6 percent) and €7,145/sqm (+12.9 percent), respectively.
How the COVID-19 pandemic affects the market remains to be seen
A couple of months after the first easing of the lockdown measures, the residential real estate market in Belgium is recovering from the steep decline in transactions in March, April and May, but is still not reaching the transaction volumes before the crisis. Apartment prices rose 5.9 percent in the first six months of 2020. Especially new built apartments have an upwards pressure on the real estate prices. Although the volumes are recovering, there is currently no identification of a price correction on the Belgian property market.
However, the real economic crisis is still expected at the end of 2020 and the year after. Currently the market is still supported by real estate investors but it remains to be seen how the crisis will impact the unemployment rate and the effect on the income of candidate-buyers. Transaction activity is still expected to be lower in 2020 and potentially for the first time since 1983, residential property prices are likely to stagnate or slightly drop in average.
“We need to integrate many different factors. On one hand, a decline of prices could be caused by uncertainty in terms of economic and epidemiologic development that might encourage buyers to postpone their decision into safer times or by increased taxation on real estate to fund partly the important COVID-19 support provided by the public authorities. Moreover, banks have already applied stricter conditions for the loan-to-value ratio or higher disposable income of applicants on new loan applications,” explained Frédéric Sohet.
“On the other hand, interest rates are historically low, property investment is still considered in Belgium as a relatively safe haven and supply of new residential assets could reduce in the medium term due to new permitting delays or constraints. Let’s also not forget that around €285 billion is currently stored in Belgian savings accounts while most people no longer wish to invest in stocks due to the volatility of stock markets or cut-off of dividends. They are looking for tangible assets to invest in,” Frédéric Sohet continues. “Last but not least, we are also observing an acceleration in the transformation of commercial and residential real estate linked to changing needs, mobility, sustainability and pandemic impact.”
About the European Property Index
The European Property Index compares the residential real estate markets throughout 23 European countries and beyond. The study analyses factors shaping the residential markets and their development and compares residential property prices, rental prices and trends in the mortgage markets in the selected countries and cities.