Belgian housing prices continue to climb while barriers for new buyers fall
Residential housing prices in Belgium have been on a remarkably stable, long-term upward trend, much to the delight of homeowners. According to newly released figures from the FOD Economie (Statbel), this growth continued in 2018. Median annual house prices (excluding apartments) increased 4.7% to €225,000 over the previous year. This was most notable in attached and semi-detached houses at 5.3% to €200,000, though free-standing houses also increased by 2.9% to €285,000. Apartment prices grew the slowest, but still achieved 2.5% for a median sales price of €182,000.
Broken down to the region level, Brussels claims the most expensive housing across the board. Housing price growth here was particularly strong this last year, with houses and apartments increasing by 4.7% to €390,000 and €199,000, respectively. Flanders and Wallonia also experienced a buoyant market, with nominal prices increasing no less than 3.2% in any given housing category over 2017 numbers.
Map of 2018 median house transaction price (excl. apartments) by commune
Price vs affordability
With constantly growing prices, questions of affordability naturally arise. Questions of over-/under-valuation aside, there are two aspects of affordability for would-be homeowners to consider: acquisition and maintenance. A buyer’s barrier to acquisition or entry in Belgium is among the highest in the EU at 2.3% of GDP compared to 1.0% average in the EU1
. The World Bank identifies it as the second most expensive member state in terms of property transfer with costs of 12.7% of the property value2
. That translates to costs of €28,575 for the median Belgian house in 2018 of €225,000. Assuming a 20% down payment to obtain a mortgage (encouraged by the National Bank of Belgium), this cost rises to €73,575 up front. These costs also increase with property values and are a substantial obstacle for the typical Belgian family.
Once a property is acquired, ownership is typically maintained by regular mortgage payments determined by the principal loaned, amortization period, and interest rate. The decline of interest rates has occurred at such a pace that they have had a greater downward effect on mortgage payments (all things equal) than housing prices have had an upward effect. In other words, managing monthly mortgage costs has become more affordable because of lower interest rates despite the rise in real estate prices. For example, using price data from Statbel, interest rates from the NBB, a typical lease term of 25 years, and LTV of 80%, the median Belgium house would have required a monthly mortgage payment of €767 in 2010 and €762 in 2018. For apartments, this would have been €639 in 2010 and €616 in 2018. All of this despite an increase in median prices of 25% for houses and 21% for apartments over the same period.
Annual Belgian residential prices and mortgage rates
The disparity between acquiring a home and maintaining it is significant. The OECD echoes this sentiment, finding households typically do not have trouble financially maintaining a residence once it is bought, while renters are more troubled. Belgian and regional housing authorities have taken steps to reduce this acquisition-maintenance imbalance. For example, Brussels and Wallonia increased the transfer tax deduction on first homes in 2017 (holding 12.5% transfer tax), and Flanders reduced the transfer tax from 10% to 7% in 2018 with additional deductions. At the same time, the mortgage debt tax deduction was eliminated in Brussels (2017), consolidated in Flanders (2016), and reformed in Wallonia via the Chèque Habitat (2016). These changes have helped to rebalance the cost burden by moving from transaction to recurrent taxes.
Note: In 2018 Statbel changed the way it reports residential transactions to include second-hand properties only and to replace ‘average’ transaction price with ‘median’ transaction price.
European Commission: Country Report Belgium 2019 Commission Staff Working Document
The World Bank: Ease of Doing Business 2019