A year of ups and downs
House prices in Belgium have not risen for months. In the first half of the year, national asking prices were still rising strongly, both for houses (+3%) and for apartments (+1.5%). In the second half of the year, however, the situation was very different: house prices stopped rising and flat prices even fell slightly in the last quarter. Even after the usual lull during the summer holidays, house prices in particular remained stable.
For the market to really be cooling, demand for property would also have to fall. For example, we saw that in the second quarter of 2022, a house went offline on average 2-3 weeks faster than in the previous quarter, in line with the sharp rise in prices in that quarter. Since then, search ads have stayed online a little longer, about 1 week longer than in the second quarter, while prices have stagnated.
Current state of affairs
A standard house1 in Belgium now costs € 1.604/m2, compared with €1.537/m2 a year ago, an increase of € 67/m2. This large difference is mainly due to the price jump in the second quarter, as prices then rose by barely € 4/m2. For apartments, we see a similar story: at the end of 2021, a standard apartment2 cost € 2.399/m2, while this price is already almost €100/m2 higher. Prices for apartments have continued to rise at a more steady pace, although the latest figures even show a slight decrease compared to the third quarter (-€7/m2).
Importantly, the cooling appears to be continuing across the market and all regions. By the end of November 2022, house prices had risen by only 0.5% in Flanders and had even started to fall in Wallonia (-0.6%) and Brussels (-0.4%). Similarly, the price of a apartment did not increase in Flanders (-0.5%) or Wallonia (-0.8%), while in Brussels it rose by only 0.4%. The larger cities did not show any different trends from the rest of Belgium. Although the price gap between the central cities and the rest of Flanders has widened in recent years, the cooling trend seems to be continuing at the same pace everywhere.
Hot or cold?
Despite the clear pattern found in our analyses, opinions were divided as to whether or not the market had cooled during the year. To understand this mixed message, an important distinction needs to be made between the evolution of asking prices and selling prices. There is an estimated lag of 4 to 6 months between the placement of an advertisement online and the execution of the deed, so the trend in asking prices precedes that of selling prices. We can therefore conclude that reports earlier this year of a cooling in the first half of the year - based on sales prices - are most likely due to the slowdown in (demand) prices at the end of 2021. Following the same logic, we can expect that the latest sales figures do not currently point to a cooling of the market. However, on the basis of our asking price figures, we can predict that sales prices will also slow down soon.
Tight budgets cripple buyers
The borrowing capacity of households plays an important role in the observed price changes. If households have more money at their disposal, market competition will push up house prices. The reverse is also true: if households can borrow less, more expensive housing will become unaffordable and prices will necessarily stop rising or even have to fall.
It is likely that in the first half of 2022 potential buyers were driven by rapidly rising interest rates in the hope of getting a cheaper loan again. Meanwhile, the average interest rate has doubled since the beginning of the year, making borrowing less attractive. In addition, inflation reached its highest level in 46 years after rising steadily throughout the year. This was largely driven by a huge rise in energy prices, with a preliminary peak in September when prices were almost five times higher than a year earlier. The cold snap in December will put renewed pressure on energy prices. All of these factors play into the reduced household budgets, which may ultimately explain the stagnation in market prices.
|Outlook 2023: buyers' market|
If current trends continue, the housing market in Belgium will change from a seller's market to a buyer's market. The ongoing energy crisis and the resulting high inflation will make potential buyers think twice before taking out a loan. The years of favourable interest rates on housing loans are also definitely behind us. (Although it should be noted that we are still at historically low levels). In other words, demand for housing will fall as households' ability to borrow is reduced. Buyers will therefore have more room for manoeuvre in a market where prices are more stable and houses stay on the market longer.
1 A standard house is defined as a 170 m2 house with 3 bedrooms, good accessibility (Realo Mobility Score of 0.8) and an annual energy consumption of 350 kWh/m2/jaar.
2 A standard apartment is defined as a apartment of 93 m2, 2 bedrooms, good accessibility (Realo mobility score of 0.8) and an annual energy consumption of 165 kWh/m2/jaar.
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