Belgium: Overview

RENTAL YIELDS

Good yields in Brussels

Gross yields are around 8% for apartments in Brussels, the centre of the rental market, according to Global Property Guide research. Gross yields for detached houses in the suburbs are around 6% to 8%, reflecting the strong demand for rental properties in the area.

The rental market is significant, at about 30% of the housing stock (23% in the private sector and 7% in social housing). In Brussels, 60% of households are renters. A significant high-income rental sector is found in the Brussels region.

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TAXES AND COSTS

Moderate to high effective income taxes in Belgium

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	12.1%	15.5%	21.8%
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Rental Income: Personal income tax rates range from 25% to 50%, depending on the taxable net income. The taxable net income is the cadastral value, increased by 40%, minus deductible expenses. As a result, the effective rental income tax is a bit lower than the headline rate, ranging from 12% to 21%.

Capital Gains: Capital gains tax of 16.5% is payable on gains on developed property held for less than five years. After a holding period of five years, no Capital Gains Tax is payable.

Inheritance: Inheritance tax rates in Belgium are progressive and vary according to the degree of kinship, region where the inheritance is opened, and the share inherited by each of the heirs.

Residents: Residents are taxed on worldwide income, at the rates previously mentioned.

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BUYING GUIDE

Total transaction costs are high in Belgium

Closing costs are high in Belgium, between 13.9% and 22.1% of property value. The bulk of the cost is accounted for by transfer duties, at 12.5% or 10%, depending on the property’s location. Roundtrip costs for new properties are much higher because of the 21% VAT.

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LANDLORD AND TENANT

Tenant protection laws are well-established in Belgium

Belgian law is pro-tenant.

Rents: Rents can be freely negotiated but rent increases above the inflation rate cannot be written into the contract. If there is a written contract, the rent will be automatically adapted once a year in accordance with the cost of living. Deposit payments must not exceed three month’s rent.

Tenant Security: Belgium’s landlord and tenant law is restrictive as regards the length of rental contracts. The main options for the duration of a lease are: a contract of 9 years and, alternatively, a contract for less than three years.

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ECONOMIC GROWTH

Improved GDP growth in 2006

Belgium is a small, developed country in western Europe with a GDP per capita of US$37,164 and a population of 10.4 million. Its capital, Brussels, is home to the headquarters of the European Union and the North Atlantic Treaty Organization.

GDP grew by 3% in 2006, the fastest rate since 2000. After the 2.4% growth in 2004, Belgium experienced a disappointing growth of 1.5% in 2005. GDP is expected to grow by 2.7% in 2007, as reform-oriented policies are continued.

Inflationary pressures remained palpable in 2006 due to higher wages and oil prices. Inflation was 2.3% in 2006 and 2.8% in 2005. With the interest rate hikes and the stabilization of oil prices, inflation is expected to ease to 1.9% in 2007.

The European Central Bank (ECB) repo rate has risen from a historic low of 2% (from June 2003 to Nov 2005) to 3.75% in May 2007. Interest rates for new variable rate mortgages were at 4.7% in Mar 2007; while the rate for 10-year fixed rate mortgages was 4.4%.

With a balanced budget since 2000, public debt has fallen as a share of GDP, allowing the government to fund the increasing welfare costs of an aging population through interest savings.