Decline in Belgium Housing Market: Impact of Rising Interest Rates

The demand for real estate in Belgium is declining as interest rates rise. Get insights on the housing market slowdown and inflation rates in the country.

Demand for real estate in Belgium is experiencing a decline as interest rates continue to rise. According to the latest data from the country's statistical office (STATBEL), the annual housing price inflation rate in the second quarter of 2023 was 1.7%, which dropped to 1.2% in the third quarter. The average inflation rate over the past four quarters stands at 3%. Additionally, the number of housing transactions from January to September 2023 decreased by 17.5% compared to the same period in 2022, totaling 92,741 transactions.

In the third quarter of 2023, the price index increased by 1.8% compared to the previous quarter, translating to a 0.71% increase in real terms. STATBEL clarifies that the index measures actual price movements without considering qualitative changes and is based on real estate transaction data obtained from FPS Finances. It is important to note that results for recent quarters are preliminary and subject to revision.

On an annualized basis, house prices remained relatively stable, but when adjusted for inflation, they actually decreased by 3.4%. New housing prices saw a rise of 5.05%, with a 1.51% increase in real terms. The average prices for attached and semi-detached houses increased by 1.7%, while detached houses and apartments saw price increases of 1.4% and 2.1%, respectively. The average cost of an attached or semi-detached house in Belgiumwas 264,500 euros, while a detached house averaged 370,000 euros.

In terms of regional variations, the Wallonia region offers the most affordable housing, ranging from 180,000 to 295,000 euros. Flemish apartments in Knokke-Heist are the most expensive, with an average price of 490,000 euros, while the cheapest apartments in the region can be found in Sint-Truiden at 172,500 euros. Wallonia's housing prices range from 120,000 euros in Charleroi to 290,000 euros in Gembloux. In the Brussels-Capital Region, Woluwe-Saint-Pierre stands out for its high cost at 352,500 euros, while Anderlecht offers more affordable options at 200,000 euros.

Despite the ongoing COVID-19 pandemic, the Belgian real estate market has not been significantly impacted. Prices saw an increase of 5.7% in 2020, 6% in 2021, and 4.8% in 2022. However, there has been a slowdown in 2023, with the market showing signs of overvaluation ranging from 6% to 15%. While this indicates a decline compared to pre-pandemic levels, Belgium’s real estate market performance remains relatively stable compared to other European countries.

Experts predict a moderate rise in house prices of 1.5% in 2024, with a decline in real terms due to expected inflation exceeding 3%. The European Commission forecasts Belgium's real GDP growth rate to be 1.4% in 2024 and 1.5% in 2025, while the IMF predicts slightly lower figures at 0.9% and 1.2%, respectively. The average gross rental yield in Belgium stands at 4.11%, with higher rates observed in Brussels (5.54%), Liege (5.08%), and Antwerp (4.73%).

The Belgian real estate market is experiencing a period of cooling off, with moderate price inflation and a slight decline in real terms. While interest rates have fallen recently, experts do not anticipate a strong recovery in the market in 2024. Affordability is expected to improve, but it may still remain below pre-2022 levels.