Market in Depth

Modest house price rises in Belgium

Lalaine C. Delmendo | January 20, 2019

Belgium's house prices continue to rise, albeit modestly, amidst a weak economy and warnings about a property bubble. During the year to Q3 2018, the nationwide house price index in Belgium rose by 2.6% (0.34% inflation-adjusted), after annual rises of 3.88% in Q2 2018, 2.53% in Q1 2018, 3.55% in Q4 2017 and 3.71% in Q3 2017, according to the Statistics Belgium. Quarter-on-quarter, the index increased 2.08% in Q3 2018.

New dwelling prices increased 4.03% y-o-y in Q3 2018 (1.74% inflation-adjusted). Existing dwelling prices rose by 2.2% over the same period (but dropped 0.06% when adjusted for inflation).

The housing market remains vibrant. The number of transactions of houses rose by 3.7% y-o-y during the first three quarters of 2018, according to Statistics Belgium. Apartment transactions increased by 3.7% y-o-y.

Residential construction is actually surging. During the first three quarters of 2018, the number of dwelling permits soared by almost 35% y-o-y to 48,111, and residential building permits issued also increased by a huge 36.4% to 22,040, according to Statistics Belgium.

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.

The Belgian economy continues to disappoint. 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). Since then house prices have risen only marginally, by 1.12% in 2012, 1.14% in 2013, 0.96% in 2014, 1.51% in 2015 and 2.62% in 2016. House prices rose by 3.55% in 2017, amidst improved economic growth.

Belgium annual house price change graphIn 2018, the economy was estimated to have grown by about 1.5%, after expansions of 1.7% in 2017, 1.4% in both 2015 and 2016, and 1.3% in 2014. The economy is projected to expand by 1.5% this year and by 1.4% in 2020, according to the European Commission.

There are no foreign ownership restrictions in acquiring Belgian property.


Analysis of Belgium Residential Property Market »

Rental Yields

Yields in Brussels moderate

Gross rental yields in Brussels range have remained steady over the past year. Gross rental yields on apartments in Brussels range from around 4.56% to 4.76%. Meanwhile, the difference between the yields on small properties, which tends to be higher, and those on larger properties, has shrunk.

The price of apartments and house in Belgium have been rising, according to the consultancy Stadim. So too have rents.

All of the apartments and houses included in our survey are located in the prime areas of Brussels. The prime areas we took were Brussels City, Etterbeek, Ixelles, St. Gilles, Uccle, Woluwe-St. Pierre, and Woluwe-St. Lambert.

The biggest reason that investors in Belgium will be discouraged is that round trip transaction costs are high for buyers of residential property. See our Belgium residential property transaction costs analysis and our Residential property transaction costs in Belgium compared to other countries

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Taxes and Costs

Moderate to high
effective income taxes in Belgium

Rental Income: Personal income tax 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 9.22% to 23.07%.

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 progressive rates, from 25% to 50%.

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Buying Guide

Total transaction costs are high in Belgium

Closing costs are high in Belgium, between 14.60% and 27.60% of property value. The bulk of the cost is accounted for by transfer duties at 10% or 12.5%, 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

Economic growth continues to disappoint

BelgiumThe Belgian economy expanded by 1.5% in 2018 – below the eurozone’s average growth of 1.9%, according to the National Bank of Belgium (NBB). The economy grew by a meagre 0.9% annually from 2008 to 2017.

The economy is projected to expand by 1.5% this year and by 1.4% in 2020, according to the European Commission.

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, and -0.1% in 2013, mainly due to the adverse impact of the eurozone debt crisis, according to Belgostat.

In November 2018, the country’s seasonally adjusted unemployment rate was 5.6%, down from 6.4% the previous year, according to the NBB.

Inflation was around 2.34% in December 2018, up from 2.13% a year earlier, based on the figures from Statistics Belgium.

Belgium’s budget deficit increased slightly to 1% of GDP in 2018, from 0.9% in the previous year. The deficit is expected to rise further to 1.1% of GDP this year and to 1.3% in 2020, according to the European Commission.

Despite this, the country’s gross national debt fell to about 101.4% of GDP in 2018, from 103.4% in 2017. The public debt is expected to fall further to 99.8% this year and to 98.7% in 2020.