Some pockets of the global housing market seem to be on the mend, while others signal prudence. Figures from the US residential housing market are promising, but there are big questions concerning the glut of apartment supply in China.
How does Europe, and particularly Belgium, fare in this picture? Big expensive European capitals, such as London and Paris, and holiday homes in Southern Europe were hardest hit in the wake of the financial and economic crisis that began at the end of 2007. The Belgian market essentially escaped this crisis with the exception perhaps of pricy villas, particularly in the Antwerp region.
The chief reason for this is that prices in Belgium were not as high as in neighbouring countries, partly because local banks are not willing to lend more than the market value of a property or to accept more than a third of the regular monthly income of a borrower as monthly repayment of a loan. Other supporting factors for the Belgian market have been the relatively resilient economy and the continuous influx of international civil servants, backed up by the service industry around them in the Brussels Capital Region.
No surprise then that the ‘Real estate barometer of the Notary Public’ in the first quarter of 2014 shows a generally very healthy private real estate market across the country with good volumes and rising prices. However, tax-wise, buying property in Belgium is expensive. In the Brussels Capital and Wallonia regions, there is a hefty 12.5% headline figure for tax on purchase. Even the 10% in the Flanders region is very high. It will take you a few years of income, and hopefully capital gains, to regain those taxes. The good news is that income from private property is currently typically taxed very low here.
No one has a crystal ball to foretell the future of the market. However, we can pinpoint the main areas from which the risk factors will come. Interest rates are currently historically low, increasing the likelihood that they will only go up in the future. Even the EU institutions have to cut back their budgets, and that should lead to fewer or less wealthy civil servants who cannot afford expensive property. More generally, as a result of the latest State Reform in Belgium, property taxation has been regionalized, leading to speculation of an increase in taxation given the substantial budget deficits of the Belgian State and its regions. On the positive side, it is projected that a lot of immigration is to be expected in Belgium by 2020, particularly in Brussels Capital Region. It remains to be seen, however, what the purchasing power of those immigrants will be.
All in all, the Belgian housing market has been, comparatively, very stable over the past decade, and that could very well continue. In any case, property has its value in any diversified investment portfolio, and Belgian ‘buy to let’ property in a good location is worth considering.