Housing sales and prices
Belgium was affected by many years of stagnant housing prices, but since mid 2015, they have steadily started to increase as demand has risen. This was after the housing boom of 2000-2008, when prices increased by 129%. Since the crisis in 2008, the housing prices have followed the economy, increasing during stronger economic periods, and falling when the economy weakens.
Official statistics from statista, indicate that the nationwide house price index rose by 2.6% year-on- year, to Q3 2018. The prices of new houses increased 4.03% and existing houses by 2.2%, year-on –year in the same quarter and transactions rose by 3.7%.
Construction of residential property is booming and during the first three quarters of 2018, the number of house building permits increased by 35% to 48,11%, and residential building permits rose by 36,4% to 22,040.
Prices in Brussels are broken down in commune levels, according to banking officials and real estate agents. The prices in areas where expats gather tend to be higher than the rest of Brussels, where prices are lower than in other popular Belgian cities.
Areas where the median prices have risen considerably in Brussels since 2016 are City of Brussels, Etterbeek, Saint Gille, Koekelberg and Auderghem. When compared to other major European cities, the average price per square meter is relatively low, at € 3,200 per m2. The average apartment price in Brussels is € 233,000 and a single- family home averages € 450,000.
The purchasing power of the average Belgian has stagnated, yet the house and rental prices have increased. Easy access to capital, after the ECB introduced a quantitative easing program, flooded the market with money, causing these housing price increases. The price increase has not discouraged buyers, and it seems that low banking interest rates are making investors turn to property to secure their spare cash.
Belgium has higher homeownership rates than France, Germany, the Netherlands and the UK, at 73%. As a nation, the Belgians are considered financially conservative, and are the world’s biggest savers and trust the property market far more than any other investments.
Belgium has no foreign ownership restrictions on property.
Gross rental yields on apartments in Brussels range from 4.56% to 5.53% and have remained steady over the past year. Houses yield anything between 4.46% and 5.01%, the difference in yields on smaller properties is usually higher, and those of larger properties have shrunk. These are the averages taken from the prime areas of Brussels which include: Laeken, Nieder-over-Heembeck, Auderghem, Ixelles, St. Gilles, Uccle and Woluwe-St. Pierre.
As the prices have increased per square meter in Brussels, so have the rents increased accordingly.
Belgium has well-established pro-tenant laws. Rents can be freely negotiated, but increases cannot be higher than the inflation rate. The rent is automatically adapted each year according to the cost of living.
The lengths of contracts are quite restrictive, with two main options: a nine year contract or one for less than three years.
Buyers of residential properties can expect to pay high transaction costs in Belgium. These costs are between 14.60% and 27.60%. Transfer duties are the biggest expense and they range from 10% to 12.5%, depending on the location of the property. New properties pay more since they are liable for VAT of 21%.
Personal property income tax in Belgium ranges between 25% and 50%. The net taxable income is the municipal value, increased by 40%, from which the deductible expenses are the subtracted. This brings the effective rental income tax to anything between 9.22% and 23.07%.
Any developed property held for less than five years will be subject to a capital gains tax of 16.5%. Thereafter, no capital gains tax is applicable.
Inheritance tax rates do apply and are progressive, varying according to degree of kinship, the percentage inherited and the region where the inheritance is accepted.
Residents are taxed on their worldwide income and the rate is progressive and varies from 25% to 50%.
Statistics from the National Bank of Belgium, show that the economy expanded by 1.5% in 2018 and the European Commission forecasts that the projected growth for 2019 will remain at the same level, with inflation dropping slightly from 2.3% in 2018, to 2.1% for this year.
The unemployment rate fell to 5.6% in 2018, from 6.4% in the previous year. Even though Belgium’s budget deficit is expected to rise to 1.1% of GDP in 2019, the country’s public debt is expected to fall from 101.4% of GDP in 2018, and to 99.8% for 2019.
It is more profitable to buy property in Belgium than to rent. Interest rates on mortgages are calculated individually, but both fixed and flexible rates on loans cannot more than double by law during the loan period.
Most of the banks have no limitations to the loan amount and some give up to 90% of the property value.
First time home buyers in Brussels also have reduced registration fees (up to €21,875), provided they keep the home for at least five years. There are other subsidies available in other areas of Belgium too.
The decrease in the provision of social housing is forcing people to spend more on rentals and mortgages.
Belgians are borrowing more than ever before, and consumer spending is increasing, while the government is spending less in order to comply with EU debt standards. However, investing in the Belgian housing market is considered to be safe and only one in ten Belgians spend more than 40% of their income on living expenses.