Belgium's residential property prices are increasing modestly, amidst recovering demand but limited supply due to the continued decline in residential construction activity.

Table of Contents

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Mortgage Market
• Rental Market
• Socio-Economic Context

Housing Market Snapshot

In Q3 2024, the nationwide house price index in Belgium rose by a modest 3.58% compared to the same period in the prior year, following y-o-y increases of 3.28% in Q2 2024, 3.2% in Q1 2024, 2.77% in Q4 2023, and 1% in Q3 2023, according to Statistics Belgium. When adjusted for inflation, prices were up by a minuscule 0.38% over the same period.

Belgium's house price annual change

Quarter-on-quarter, the overall house price index increased by 1.6% in Q3 2024 (0.78% in real terms).

Existing dwelling prices were up by a modest 3.22% in Q3 2024 from a year earlier (but more or less steady when adjusted for inflation). New dwelling prices increased by a stronger 5.2% (1.96% in real terms) over the same period.

Demand is showing some improvements, with the total number of residential property transactions increasing slightly by 0.9% y-o-y to 93,818 units in the first three quarters of 2024, an improvement from a full-year decline of 14.6% in 2023, based on figures released by Statistics Belgium.

During Belgium's housing boom (2000-Q3 2008), nationwide house prices soared by 129% (86% inflation-adjusted). Since the global financial crisis, house prices have followed the economy. When the economy was strong, house prices rose. When the economy was weak, house prices stagnated.

When the economy emerged from recession in 2011, the housing market bounced back strongly with Brussels house prices surging by 9.6% (5.7% inflation-adjusted). After that house prices rose slowly, by an annual average of just 1.2% in 2012-2015. Since then the pace has quickened again. House prices rose by 2.5% in 2016, 3.6% in 2017, 2.5% in 2018, and 4.8% in 2019, on the back of improved economic growth.

Surprisingly, the housing market remained strong in the succeeding three years, despite the Covid-19 pandemic. House prices rose by 5.7% in 2020, by 6% in 2021, and by another 4.8% in 2022. During 2023, house prices continued to increase, albeit at a slower pace of 2.77%, amidst the economic slowdown and the rapid increase in interest rates.

The Belgian housing market is expected to improve in the medium term, as potential homebuyers return to the market, buoyed by gradually falling interest rates.

"As interest rates stabilize, we expect many buyers to abandon their wait-and-see approach, realizing that rates will not return to pre-2022 lows. Consequently, we anticipate a stronger increase in transactions in 2025, which will support price growth," said ING Global Markets Research.

Yet the overall economy remains weak. During 2024, Belgium's economy expanded by a meager 1.1% from a year earlier, based on data released by both the European Commission and the International Monetary Fund (IMF). The NBB reported an even more restrained economic growth rate of just 1% last year.

Last year's growth was a slowdown from annual expansions of 1.4% in 2023, 3% in 2022, and 6.9% in 2021. In fact, aside from the pandemic year of 2020, it marked the country's weakest performance since 2013.

The country's economic performance is expected to remain sluggish, with a projected real GDP growth rate of 1.2% this year and 1.5% in 2026, according to the European Commission. Forecasts from the NBB and IMF largely align with this outlook.

Belgium's GDP per capita reached €51,510 (US$56,129) in 2024, up by nearly 43% from a decade ago, based on IMF figures.

Historic Perspective:

Regional house price variations

Belgium is divided into three regions:

• the Flemish Region that occupies the northern half with Dutch-speaking communities;
• the Walloon Region which occupies the southern half and is made up largely of French-speaking communities, with a small German-speaking community in the south-east; and
• Brussels, the administrative capital region, is an officially tri-lingual city inside the Flemish region.

Each region and community has a separate parliament and executive administration, with power increasingly devolved. There is 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 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 figures from Statistics Belgium.

The drivers of Belgium's house price boom were:

• rapid mortgage market expansion, due to low interest rates and increased competition between banks; and
• economic and wage growth.

When these conditions were reversed with the global credit crunch, house price rises slowed sharply. From 2009 to 2019, house prices in Brussels increased by only 28% (7% in real terms). In the Flemish and Walloon regions, prices rose in 2009-2019 by 37% (15% in real terms) and 27% (6% in real terms), respectively.

Surprisingly house price growth continued in the past four years despite the pandemic. In 2020-23, Brussels house prices rose by 21.5% (3.8% in real terms). In the Flemish and Walloon regions, house prices increased by 25.6% (7.4% in real terms) and 21.6% (4% in real terms), respectively.

In Q3 2024:

• In the Brussels-Capital region, the median price of detached houses soared by 20% y-o-y to €1,020,250 (US$1,064,758) while it increased slightly by 0.4% to €505,000 (US$527,030) for attached and semi-detached houses. Apartment prices were up by 2.7% y-o-y to an average of €267,000 (US$278,648).
• In the Flemish region (Flanders), the median prices of detached, and attached/semi-detached houses rose by 2.4% y-o-y to €419,900 (US$438,218) and by 1.7% to €305,000 (US$318,306), respectively. Apartment prices increased by a meager 0.4% y-o-y to €250,000 (US$260,906).
• In the Walloon region (Wallonia), the median price of detached houses was up by 5.1% y-o-y to €310,000 (US$323,524) while it increased by 3.4% to €185,000 (US$193,071) for attached/semi-detached houses. The median price of apartments fell slightly by 0.4% y-o-y to €182,000 (US$189,940).

Belgium's house prices no longer overvalued?

Recent reports indicate that Belgian house prices are now largely balanced, following a sharp cooling of the housing market over the past two years. However, opinions on this vary, with estimates differing based on the methods used to assess the price overvaluation.

When measured in terms of price-to-income ratio, the housing market was still well overvalued in Q2 2024, at 36%, but much less so than the overvaluation of about 52% calculated in early 2022, according to a recent report published by KBC Group in January 2025.

When the effect of mortgage interest rates is taken into account, the resulting interest-adjusted affordability shows that house prices in Belgium remain overvalued by 17%.

"Due to the trend of sharp decline in interest rates, the overvaluation calculated this way was completely eliminated in 2019. With the monetary contraction and interest rate hike that followed since spring 2022, the overvaluation had risen again to 26% by the end of 2023, but the latest interest rate decline and income growth brought it down to 17% in Q2 2024," said the KBC report.

But when other factors such as demographics (number of households) and changes in the structural characteristics of the housing market (such as property taxes) are included in the model aside from household income and mortgage interest rates, Belgian house prices are now largely balanced.

"According to KBC Economics' demand-driven model, the overvaluation thus quantified was 12.5% in Q3 2023. Since that peak, the overvaluation has gradually declined and even almost disappeared (0.4% in Q2 2024). According to a similar modeling approach by the ECB, which is more rudimentary, the Belgian market was even marginally (by 4%) undervalued in Q2 2024," noted the KBC report.

An earlier study conducted by Belfius also showed a modest house price overvaluation of at least 8.73%, with the overvaluation most pronounced in the provinces of Antwerp and Walloon Brabant, the east of Limburg on the coast, the region around Liège and the Brussels-Capital region.

This is supported by the National Bank of Belgium (NBB), the country's central bank. In its Financial Stability Report 2023, the NBB noted: "Due to this moderation of house price growth, the gap between actual property prices and prices estimated using the Bank's model declined to 10%. However, this indicator should be interpreted with caution given that it is an estimate based on an econometric model, which is more uncertain in the context of high inflation."

A pre-pandemic study conducted by the Organisation for Economic Co-operation and Development (OECD) has suggested that Belgium's housing market was overvalued by as much as 50% because incomes have not risen as quickly as house prices. Similarly, Deutsche Bank said that Belgian homes were 53% overvalued, with house prices 51% higher than the historical average, relative to income.

However, the sharp housing market slowdown over the past two years has significantly reduced or even eradicated house price overvaluation in the country.

Demand Highlights:

Property transactions stabilizing

Property demand is more or less steady in Belgium, with the total number of residential property transactions increasing slightly by 0.9% y-o-y to 93,818 units in the first three quarters of 2024, according to Statistics Belgium.

By region:

• In the Flemish region, residential property transactions rose by 3.6% y-o-y to 60,078 units in the first three quarters of 2024, following an annual decline of 17.4% in the full year of 2023 and expansions of 8.3% in 2022 and 20% in 2021.
• In the Walloon region, sales transactions were down 5.4% y-o-y to 25,077 units in Q1-Q3 2024, after falling by 9.4% in 2023 and 0.5% in 2022 and increasing by 10.3% in 2021.
• In the Brussels-Capital region, sales transactions were up by 2.2% to 8,663 units in the first three quarters of 2024 as compared to a year earlier, following an annual decline of 9.1% in 2023 and y-o-y increases of 0.7% in 2022 and 18.9% in 2021.

After reaching record-high sales of 150,735 units in 2022, demand slowed in 2023, with transactions falling by 14.6% y-o-y to 128,791 units. Before the Covid-19 pandemic, transactions had been growing by an annual average of nearly 10% from 2016 to 2019.

Supply Highlights:

Residential construction activity continues to decline

In the first nine months of 2024, the total number of new residential building permits authorized in Belgium fell by 13.9% y-o-y to 16,448, following annual declines of 11.3% in the full year of 2023 and 9.9% in 2022, according to Statistics Belgium.

Similarly, dwellings authorized were down by 9.1% to 34,059 units in Jan-Sep 2024, after falling by 7% in 2023 and by another 12.2% in 2022.

By region:

• In the Flemish region, residential building permits dropped 14.7% to 12,051 in the first nine months of 2024 from a year earlier while dwellings authorized declined by 9.5% to 24,419 units over the same period.
• In the Brussels-Capital region, residential building permits fell by a huge 39.2% y-o-y to 110 in the first nine months of 2024 and dwellings authorized also plunged by 45.2% to 1,401 units over the same period.
• In the Walloon region, new residential building permits were down by 10.1% y-o-y to 4,284 in Jan-Sep 2024 while dwellings authorized increased by a modest 4.2% y-o-y to 8,238 units.

Nine of the ten provinces experienced falling residential construction activity in the first nine months of 2024. Liège saw the biggest y-o-y decline in terms of total number of new residential building permits, at 23.1%, followed by Vlaams-Brabant (-21.9%), Oost-Vlaanderen (-17.4%), Antwerpen (-16.7%), Limburg (-15.4%), and Luxembourg (-14.2%).

Other provinces that registered falling building permits included Hainaut (-8.4%), Brabant Wallon (-6.7%), and West-Vlaanderen (-5.1%).

Only Namur recorded a y-o-y increase in the number of residential building permits in the first nine months of 2024 of 9.9%.

Mortgage Market:

Interest rates on new housing loans falling again, following ECB rate cuts

Interest rates in Belgium are now gradually falling again, following the monetary policy shift implemented recently by the European Central Bank (ECB), in an effort to stimulate economic activity in the region. In December 2024, the ECB slashed its key interest rate by another 25 basis points to 3.15%, its fourth consecutive rate cut since June 2023. Prior to this, the ECB raised the key rate ten times from 0.00% in July 2022 to a record high of 4.50% in September 2023 to rein in inflationary pressures.

Belgium's mortgage loan interest rates:

As a result, the average interest rate for new housing loans fell to 3.19% in November 2024, sharply down from 3.81% a year earlier but still higher than the 2.89% recorded two years ago.

By initial rate fixation (IRF):

• Floating rate & IRF up to 1 year: 4.74% in November 2024, down from 5.45% in the previous year but still up from 3.18% two years ago
• IRF of 1-5 years: 3.97%, down from 4.95% in November 2023 but still up from 3.63% in November 2022
• IRF of 5-10 years: 3.09%, down from 3.85% a year earlier but still higher than the 2.87% seen two years ago
• IRF of over 10 years: 2.97%, down from 3.56% in the prior year but still slightly up from 2.76% two years earlier

However, interest rates on outstanding housing loans continue to rise. In November 2024, the average interest rate on outstanding loans stood at 2.26%, up from 2.07% in the previous year and 1.78% two years prior.

By maturity:

• Up to 1-year maturity: 5.18% in November 2024, slightly up from 5.11% in November 2023 and far higher than the 2.76% in November 2022
• Over 1 and up to 5 years maturity: 2.7%, up from 2.25% a year earlier and 1.59% two years ago
• Over 5 years maturity: 2.24%, up from 2.05% in the previous year and 1.78% two years earlier

Belgium's mortgage market showing signs of improvement

In the first eleven months of 2024, the volume of new residential mortgage loans drawn - excluding refinancing - increased by 10.1% y-o-y to €30.53 billion (US$31.86 billion), following annual declines of 31.9% in 2023 and 12.4% in 2022.

"The decline in mortgage rates in 2024 has improved housing affordability, allowing potential buyers to borrow more for the same monthly payment. This increased affordability has positively impacted the market, significantly boosting transaction numbers," said ING Global Markets Research.

As a result, the total value of housing loans outstanding rose by a modest 3.1% y-o-y to €241.72 billion (US$252.26 billion) in November 2024, following annual increases of 2% in 2023, 8.1% in 2022, 8% in 2021, 10.7% in 2020, and 7.6% in 2019, based on figures from the ECB. Yet the past two years had been the lowest growth recorded since 2011.

While Belgium's mortgage market continues to expand, the rate of growth is a sharp slowdown from an average growth of 10% annually in the past decade. In fact, during 2024, the size of the mortgage market as a percentage of GDP contracted to less than 40%, from 40.2% in 2023, 41.6% in 2022, 42% in 2021, and 42.9% in 2020, according to the Global Property Guide. However, it remains a huge expansion from just about 22% of GDP back in 2011.

The Belgian mortgage market is dominated by four major private financial conglomerates: BNP Paribas Fortis, KBC Bank, Belfius Bank, and ING Belgium, which account for almost two-thirds of the entire banking sector. Intense competition in the past decade has led to low fees and charges, and more mortgage options.

Belgian banks remain the leading players in the country's mortgage market, granting the vast majority of new home loans. "According to data from the financial accounts, around 91% of mortgage loans granted to Belgian residents are on the balance sheets of banks, predominantly Belgian banks," said the NBB in its Financial Stability Report 2024.

"Foreign banks, either operating on a cross-border basis or through branches, account for only a very small share of Belgian residents' outstanding mortgage loans. The remainder is shared between insurance companies (around 4%) and providers of social loans (around 5%). These shares have remained quite stable over the past few years," added the central bank.

Rental Market:

Moderate rental yields, large rental market

Gross rental yields in Belgium have remained more or less steady over the past two years. Based on research conducted by the Global Property Guide in January 2025, gross rental yields on apartments stands at 4.24% in Q1 2025, not significantly different from 4.2% in Q1 2024 and 4.11% in Q3 2023.

By major areas:

• In Brussels, gross rental yields for apartments are higher than the national average, ranging from 4.87% to 6.02% in Q1 2025, with a city average of 5.56%.
• In Antwerp, apartments offer rental yields of about 3.31% to 6.04%, with a city average of 5.09%.
• In Brugge, apartments offer lower rental returns of between 1.99% and 3.76%, with a city average of 2.75%.
• In Oostend, rental yields range from 3.43% to 5% in Q1 2025, with a city average of 4.26%.
• In Liège, gross rental yields for apartments range from 4.3% to 5.38% in Q1 2025, with a city average of 4.75%.
• In Kortrijk, apartments offer rental returns of around 3.49% to 3.91%, with a city average of 3.7%.
• In Leuven, rental yields range from 3.69% to 4.34%, with a city average of 3.88%.
• In Mechelen, rental yields range from 3.74% to 4.28%, with a city average of 3.95%.

"Whilst current yield levels are low, they are higher than in the neighboring countries and thus remain attractive for international investors as a geographical diversification providing stable returns and prospective capital value growth," said JLL.

The rental market is 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, because of rent controls.

However, 60% of households in Brussels are renters, a fact partly encouraged by Belgium's unusually high buy/sell costs.

Socio-Economic Context:

Sluggish economic growth, stable labor market

During 2024, Belgium's economy expanded by a meager 1.1% from a year earlier, based on data released by both the European Commission and the International Monetary Fund (IMF). The NBB reported an even more restrained economic growth rate of just 1% last year.

Last year's growth was a slowdown from annual expansions of 1.4% in 2023, 3% in 2022, and 6.9% in 2021. In fact, aside from the pandemic year of 2020, it marked the country's weakest performance since 2013.

"Private consumption increased only moderately, due to weakening purchasing power and employment growth. While business investment grew significantly, driven by exceptional transactions, household investment remained constrained," said the European Commission. "Exports and imports are both set to decrease (in 2024), although the slower decrease of exports results in a positive contribution of net exports to growth."

The country's economic growth is expected to remain sluggish, with a projected real GDP growth rate of 1.2% this year and another 1.5% in 2026, based on a forecast released by the European Commission. The NBB and IMF forecasts are not materially different.

From 1997 to 2007, the country enjoyed healthy economic growth of about 2.5% per year. But since the global financial crisis, growth has been weak. GDP growth was 0.4% in 2008, -2% in 2009, 2.9% in 2010, 1.7% in 2011, 0.7% in 2012, and 0.5% in 2013, mainly due to the adverse impact of the eurozone debt crisis, according to the NBB.

Belgium's economy has been sluggish since, registering an annual average growth of just less than 1.3% from 2009 to 2019. Then economic conditions became even worse in 2020 during the onset of the Covid-19 pandemic, with the country suffering an economic contraction of 5.3%.

Belgium's overall inflation reached 3.16% in December 2024, a significant increase from 1.36% a year earlier, according to figures from Statistics Belgium. This surge was primarily driven by the rollback of government measures designed to cushion the impact of high energy prices.

From an annual average of less than 2% in 2000-2021, nationwide inflation soared to 10.3% in 2022. It decelerated again to 2.3% in 2023.

From an annual average of 4.4% last year, nationwide inflation is projected to ease again to 2.9% this year and further to 1.9% in 2026, based on the European Commission's forecast.

The labor market is generally stable. In November 2024, the seasonally adjusted unemployment rate stood at 5.8%, unchanged from the previous month but up from 5.5% a year ago, according to the NBB.

Unemployment averaged 5.7% in 2018-2023, down from 8% in 2010-2017. The jobless rate is expected to remain more or less steady at 5.5% to 5.6% in the next two years.

"Employment is set to increase steadily over the forecast horizon. At the same time, the increase of the retirement age is expected to bolster labor market participation," said the European Commission. "The unemployment rate is expected to remain broadly stable at around 5.6%. The wage growth, driven by automatic wage indexation, is projected to slow down over the forecast horizon, notably due to projected deceleration of inflation."

Strained public finances

The European Commission has repeatedly condemned Belgium's high levels of public spending in recent years, with the country accumulating the highest budget deficit in the eurozone in 2022. With a deficit of approximately 4.6% of GDP last year, Belgium remains among the region's worst-performing nations in terms of budget balance.

The Commission warned recently that the country's budget deficit could reach 4.9% of GDP this year if no policy adjustments are made. Key concerns include rising expenditures on pensions, social benefits, and interest payments on national debt.

"In 2025, the deficit is forecast to increase further to 4.9% of GDP considering that no new major measures have been planned at this stage," said the European Commission. "Expenditure on aging-related and other social benefits are set to continue their upward trend. In addition, interest expenditure is projected to increase further, as a result of the higher government debt level and a higher refinancing rate on maturing debt, even though interest rates are expected to fall."

Belgium's budget deficit surged to about 9% in 2020 due to the Covid-19 pandemic, from just 0.8% of GDP in 2017, 1% in 2018 and 2% in 2019. Although the deficit has gradually declined over the past four years, it has remained above the Maastricht threshold of 3%.

An earlier IMF report also indicated that Belgium's fiscal position has deteriorated since the Covid-19 pandemic and energy crisis. "In a scenario where no further adjustment would be made, the fiscal deficit would remain high and continue rising over the medium term, mainly reflecting the impact of permanent social benefit and wage measures taken during COVID, indexation, population aging, and higher interest cost," said the IMF.

As a result, the country's gross national debt as a percentage of GDP remained high at around 103.4% of GDP in 2024, from 103.1% of GDP in 2023, 102.6% in 2022, 108.4% in 2021, and 111.2% in 2020. It was just at around 97.5% of GDP during the pre-pandemic year of 2019.

The public debt is expected to increase further to about 105.1% of GDP this year and to 107.2% in 2026.

Sources:

• House price index (Statistics Belgium): https://statbel.fgov.be/
• Statistiek van de verkopen van gebouwen: aantal en verkoopprijs per datum, oppervlakte en type gebouw (Statistics Belgium): https://bestat.statbel.fgov.be/
• House prices - third quarter 2024 (Statistics Belgium): https://statbel.fgov.be/
• Belgian housing market revives after cooling but outlook remains subdued (KBC Group): https://www.kbc.com/
• Belgian houses almost 9% too expensive (The Brussels Times): https://www.brusselstimes.com/
• Building permits: September 2024 (Statistics Belgium): https://statbel.fgov.be/
• Key ECB interest rates (European Central Bank): https://www.ecb.europa.eu/
• Financial Stability Report 2024 (National Bank of Belgium): https://www.nbb.be/
• Financial Stability Report 2023 (National Bank of Belgium): https://www.nbb.be/
• Belgian real estate market to rebound in 2025 (ING): https://think.ing.com/
• Gross rental yields in Belgium: Brussels and 7 other cities (Global Property Guide): https://www.globalpropertyguide.com/
• Economic projections for Belgium (National Bank of Belgium): https://www.nbb.be/.
• Economic forecast for Belgium (European Commission): https://economy-finance.ec.europa.eu/
• Belgium: searching for a glimmer of hope amid weak growth (ING): https://think.ing.com/
• Economic budget - Economic forecasts 2024-2025 - September 2024 (Federal Planning Bureau): https://www.plan.be/
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• Belgian economy set to continue to grow moderately (National Bank of Belgium): https://www.nbb.be/
• Belgium: At a Glance (International Monetary Fund): https://www.imf.org/
• Inflation amounts to 3.16% (Statistics Belgium): https://statbel.fgov.be/
• Youth unemployment rate nears 20% in the third quarter of 2024 (Statistics Belgium): https://statbel.fgov.be/
• Harmonized unemployment rate (National Bank of Belgium): https://stat.nbb.be/
• Morningstar DBRS Confirms the Kingdom of Belgium at AA, Stable Trend (Morningstar DBRS): https://dbrs.morningstar.com/
• Belgium has a second worst budget in the eurozone, European Commission concludes (Belga News Agency): https://www.belganewsagency.eu/
• European Commission warns Belgium about rising public spending (The Brussels Times): https://www.brusselstimes.com/
• Belgium: Staff Concluding Statement of the 2023 Article IV Mission (International Monetary Fund): https://www.imf.org/