Though overvalued, Belgium's housing market is heading up
Last Updated: April 01, 2015
- House prices rose by 2.42% (2.51% inflation-adjusted), after increases of 0.06% in 2013, 1.1% in 2012, 3.31% in 2011 and 5.05% in 2010.
- Apartment prices increased slightly by 0.52% (0.62% inflation-adjusted) y-o-y, after a fall of 0.59% in 2013 and rises of 2.62% in 2012, 4.62% in 2011 and 5.43% in 2010
- Villa prices rose by 1.82% (1.92% inflation-adjusted), an improvement from a decline of 1.03% in 2013, and a meagre increase of 0.25% in 2012
The purchase price of existing dwellings rose by 1.7% (1.8% inflation-adjusted) in 2014 from a year earlier. On the other hand, the price of new dwellings fell by 0.6% (-0.5% inflation-adjusted). The average price of regular houses in Belgium stood at €202,137 in the third quarter of last year:
- In Brussels-Capital region, house prices fell by 1.33% (-1.33% inflation-adjusted) to an average of €370,131
- In the Flemish region (Flanders), house prices increased slightly by 0.15% (0.15% inflation-adjusted) to an average of €215,053
- In the Walloon region (Wallonia), house prices rose by 1.57% (1.57% inflation-adjusted) to an average of €153,082
During Belgium’s housing boom (2000-Q3 2008), nationwide house prices soared by 129% (86% inflation-adjusted).
Since the crisis, Belgian house prices have followed the economy. In years when the economy was strong, house-prices rose. When the economy was weak, house prices stagnated. The Belgian economy expanded by 1% in 2014, the strongest growth since its 1.8% expansion in 2011, mainly due to growth in the industrial and construction sectors. The economy is projected to grow by 1.25% and 1.5% in 2015 and 2016, respectively, according to Rabobank Group.
Yields in Brussels moderate, but yields on houses improve
Gross rental yields in Brussels range have remained steady over the past year. Gross rental on apartments in Brussels range from around 4.56% to 5.53%, while yields on houses range from 4.46% to 5.01%. Meanwhile, the difference between the yields on small properties, which tends to be higher, and those on larger properties, has shrunk.
Square metre (sq. m.) prices of apartments and houses in the prime districts of Brussels have been increasing, according to the latest survey of Global Property Guide. 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 Laeken, Nieder-over-Heembeck, Auderghem, Ixelles, St. Gilles, Uccle, Woluwe-St. Pierre, and Woluwe-St. Pierre. Our survey included around 2,300 apartments and houses.
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
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%.
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.
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.
Belgian economy gradually recoveringBelgium, with more than 11 million people, is the sixth-largest economy in the Eurozone. The country has a GDP per capita of US$7,164 in 2014, according to the International Monetary Fund (IMF). Brussels, the capital, is the headquarters of the European Union (EU) and the North Atlantic Treaty Organization (NATO).
Belgium’s economy grew by 1% from in 2014, according to the National Bank of Belgium (NBB), the strongest figure since its 1.8% expansion in 2011, mainly due to growth in the industrial and construction sectors. The economy is projected to grow by 1.25% and 1.5% in 2015 and 2016, respectively, according to Rabobank Group.
From 1997 to 2007, the country enjoyed a healthy economic growth of about 2.4% per year. But since the crisis growth has been weak. GDP growth was 0.99% in 2008, -2.8% in 2009, 2.3% in 2010, 1.8% in 2011, - 0.14% in 2012, and 0.2% in 2013, mainly due to the adverse impact of the eurozone debt crisis, according to Belgostat.
In 2014, the country’s seasonally adjusted unemployment rate stood at 8.5%, according to the NBB. The jobless rate for men was 8.9% in January 2015 while it was 8.1% for women.
Falling inflation remains a concern, as elsewhere in the eurozone. In February 2015, Belgium’s inflation rate was -0.4%, based on figures from the NBB. The country had an average annual inflation rate of 2% from 2010 to 2014, according to the IMF.
In 2014, the country’s budget deficit was estimated at about - 3.3% of GDP, according to the National Bank of Belgium. Belgium’s gross national debt amounted to 102% of GDP in 2014, the highest level since 2002.