During the year to Q3 2016, the nationwide house price index rose by 2.88% (0.75% inflation-adjusted), after annual rises of 2.19% in Q2 2016, 3.18% in Q1 2016, 1.52% in Q4 2015, and 2.82% in Q3 2015, according to the Statistics Belgium.
The price of new dwellings rose by 3.92% (1.77% inflation-adjusted) y-o-y in Q3 2016. The price of existing dwellings increased 2.48% (0.36% inflation-adjusted) over the same period.
By property type:
Average house prices stood at €217,541 (US$ 231,540) in the third quarter of last year. During the year to Q3 2016:
Demand is now picking up. The total number of transactions for regular houses in Belgium rose 18.5% during the first three quarters of 2016, according to Statistics Belgium, in sharp contrast to the 23.2% sales decline seen in 2015. Likewise, the value of transactions surged 22.4% y-o-y in Jan-Sep 2016.
Residential construction is rising. During the first nine months of 2016, the number of dwelling permits issued in Belgium rose by 16.8% y-o-y, according to the National Bank of Belgium (NBB), while residential building permits increased 8.1% over the same period. In 2015, dwelling permits and residential building permits suffered declines of 15.8% and 14.2%, respectively.
During Belgium’s housing boom (2000-Q3 2008), nationwide house prices soared by 129% (86% inflation-adjusted). Since the crisis, house prices have followed the economy. When the economy was strong, house-prices rose. When the economy was weak, house prices stagnated. Belgium’s economic growth in 2016 was estimated at just 1.2%, after growth of 1.5% in 2015 and 1.7% in 2014, according to the NBB. The economy is projected to grow by 1.4% this year.
There are no foreign ownership restrictions in acquiring Belgian property.
Belgium is divided into three regions:
Each region and community has a separate parliament and executive administration. Power has been increasingly devolved. There is also a persisting ethnic conflict, and the political union has come under rising threat.
Property prices in Belgium’s three regions move in the same price cycle, but the capital has registered much the highest price increases. Prices in Brussels surged almost 200% (140% in real terms) from 1998 to 2008, much more than in the two other regions (143% for the Flemish region and 116% in Walloon), according to Statistics Belgium.
The drivers of Belgium’s house price boom were:
When these conditions were reversed with the global credit crunch, house price rises stopped. Then when the economy emerged from recession in 2011, the housing market bounced back strongly with Brussels house prices surging by 9.58% (5.7% inflation-adjusted). House prices in the whole country have risen only marginally since then, by 1.12% in 2012, 1.13% in 2013, 0.96% in 2014, and 1.52% in 2015.
In 2015, dwellings permits and residential building permits declined by 15.8% and 14.2%, respectively, according to the National Bank of Belgium (NBB). However, during the first nine months of 2016, there was a sharp turnaround with the number of dwelling permits rising by 16.8% y-o-y to 40,964,and residential building permits issued also increased 8.1% to 18,152 over the same period.
During the first three quarters of 2016, the number of residential property transactions in Belgium rose by 11.3%, according to Statistics Belgium, while the value of transactions rose 13.8%.
Demand for all property types are now rising sharply. During the first three quarters of 2016:
There is general agreement that the housing market slowdown starting the first half of 2014 was not enough to bring house prices back to "normal" levels. That begs the question, what is normal?
There are many different opinions, but research generally suggests that Belgian house prices are overvalued. One view is that of the Belgian Federal Institute of National Accounts, which suggests that Belgian house prices are overvalued by only about 9%. However research by the Organisation for Economic Co-operation and Development (OECD) has suggested that Belgium’s housing market is overvalued by as much as 50%, because income has not risen as quickly as house prices. Deutsche Bank agrees that Belgian homes remain 53% overvalued, with house prices still 51% higher than the historical average, relative to income. And the International Monetary Fund (IMF) also warned in 2014 that house prices in Belgium remain well above historical averages in relation to incomes and rents.
An IMF press release in March 2016 points out that house prices in Belgium have stabilized since 2013, following a long period of rapid growth. The IMF´s staff analysis also "does not suggest a major overvaluation, as past price trends were broadly in line with borrowing cost, demographic and income developments". According to the IMF, despite sustained house price hikes, Belgium´s average house prices were still "relatively affordable".
The IMF´s 2015 report explained that crude measures, based on historical price-to-income (PTI) and price-to-rent (PRR) ratios, reveal a 30% to 35% overvaluation (calculated over the 1993-2013 period) and a 47% to 58% overvaluation (calculated over the 1980-2013 period), depending on the reference period. However, when underlying drivers of housing demand and supply are considered, the overvaluation was only around 3.6% or 4.2% (overvaluation without private credit) in 2013.
In November 2016, there were the following average housing loan rates:
Interest rates peaked at 5.33% in October 2008 for new mortgages with 10-year interest rate fixation (IRF), while those with floating rate and up to 1year IRF peaked at 6.02%.
From being largely stable from 2012 to 2014, mortgages rates have been falling again in recent months, after the ECB cut the key rate to zero in March 2016.
Over the past four years housing loans have soared. In 2015, the size of the mortgage market was more than 32% of GDP, nearing the 33% of GDP it reached in 2007, which was followed by rapid contraction to just 22% of GDP in 2011, due to the global crisis.In fact, outstanding housing loans have risen by an average of 12.3% annually from 2012 to 2015.
In November 2016, the total amount of outstanding housing loans rose by 9% y-o-y to €142.16 billion (US$ 151.31 billion), after annual increases of 11.7% in 2015, 19.9% in 2014, 11.2% in 2013 and 6.5% in 2012, according to the European Central Bank (ECB).
Mortgage lending was strongly driven by loan refinancing, "with the large volumes of ‘new’ loan production being offset by the historically high levels of prepayments observed throughout the market", according to Fitch Ratings.
The Belgian mortgage market has been dominated by four major private financial institutions: Fortis, Dexia, KBC, and ING Belgium since a wave of privatization, mergers and acquisition in the 1990s. All four have interests spread across the financial industry including investment management, retail banking and insurance. Intense competition has led to low fees and charges, and more mortgage options.
Belgium´s rental market has moderate gross rental yields. In Brussels, rental yields on apartments range from 4.87% to 5.37%, according to Global Property Guide research in October 2015. Smaller apartments of around 50 sq. m. and 75 sq. m. have higher yields at 5.06% and 5.37%, respectively. Larger apartments of around 120 sq. m. have lower yields at 4.87%.
The rental market has been subdued for a number of years because of rent controls (see Landlord and Tenant section) and the rising number of homeowners. The rental market is significant, at about 30% of the housing stock (23% in the private sector, 7% in social housing); but this is falling, and is down from 38% in 1980 and 33% in 1990.
However, 60% of households in Brussels are renters, a fact partly encouraged by Belgium’s unusually high buy/sell costs.
The Belgian economy was estimated to have expanded by 1.2% in 2016, a slight slowdown from growth of 1.5% in 2015, according to the NBB. The expansion ongoing since the second half of 2013 was attributed to:
Domestic demand has slowly picked up in the past two years. With oil prices at historic lows, the growth of purchasing power is propelling private consumption.
The economy is projected to grow by 1.4% this year, according to the NBB.
“Belgium´s economic growth in 2017, should be a little more sustained than it proved to be in 2016,” says a recent report published by the Institute for Economic and Social Research of UCL (IRES).
“Indeed exports are likely to be able to take advantage of an international economic environment which is becoming progressively better focused. At the same time domestic demand is likely to be supported by both the advantageous position of the employment market and the revival of business and household consumer confidence.”
From 1997 to 2007, the country enjoyed healthy economic growth of about 2.5% per year. But since the crisis growth has been weak. GDP growth was 0.7% in 2008, -2.3% in 2009, 2.7% in 2010, 1.8% in 2011, 0.2% in 2012, -0.1% in 2013, and 1.7% in 2014, mainly due to the adverse impact of the eurozone debt crisis, according to Belgostat.
In November 2016, the country’s country´s seasonally adjusted unemployment rate was 7.6%, down from 8.7% the previous year, according to the NBB. Over the same period, the jobless rate for men was around 7.8% while it was about 7.5% for women.
Inflation was around 2% in December 2016, up from 1.5% a year earlier, based on the figures from the NBB. The country had average annual inflation of 1.8% from 2010 to 2015, according to the IMF.
In 2016, Belgium´s budget deficit was estimated at 3% of GDP, up from 2.5% of GDP a year earlier, according to the European Commission. The deficit is expected to decline to 2.3% of GDP this year.
Belgium’s gross national debt was equivalent to about 107% of GDP in 2016, the highest level since 2002. No significant change is expected over the next two years.
Earlier last year, Belgium was shocked by terrorist attacks in the country´s capital, Brussels. In March 22, 2016, three coordinated nail bombings were reported, two at Brussels Airport in Zaventem and another one at the Maalbeek metro station. The incident left a death toll of 32 victims and 3 suicide bombers, as well as around 300 people injured. The act of terrorism, the deadliest in Belgium´s history, was claimed by the Islamic State of Iraq and the Levant (ISIL). To avoid any similar incident in the future, Belgian authorities have been conducting massive anti-terrorists raids in recent months, particularly in and around Brussel’s Molenbeek district, which was dubbed as Europe’s jihadi capital.
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