A year of ups and downs
The housing prices in Belgium haven't been increasing for months. In the first half of 2022, asking prices nationally rose significantly for both houses (+3%) and apartments (+1.5%). However, in the second half of the year, the situation looked quite different: house prices stopped rising, and apartments even began to slightly decline in the last quarter. Even after the usual calm during the summer vacation, house prices, in particular, remained stable.
To truly speak of a cooling of the market, the demand for properties should also decrease. We observed that a house in the second quarter of 2022 went offline on average 2 to 3 weeks faster than the previous quarter, in line with the strong price increases of that quarter. Since then, listings have been staying online a bit longer again, approximately 1 week longer than in the second quarter, at the same time that prices have stagnated.
Current st(alem)ate of the market
Today in Belgium, you pay €1604/m² for a standard house, whereas it was €1537/m² a year earlier, an increase of €67 per square meter. This significant difference is mainly due to the price jump in the second quarter, as prices have only risen by €4/m² since then. For apartments, we see a similar story: at the end of 2021, a standard apartment cost €2399/m², while that price is now nearly €100/m² higher. Apartment prices have continued to rise at a steadier pace, although the latest figures even indicate a slight decrease compared to the third quarter (-€7/m²).
It is important to note that the cooling down seems to be taking place across the entire market and all regions. By the end of November 2022, house prices had only increased by 0.5% in Flanders and had actually begun to decline in Wallonia (-0.6%) and Brussels (-0.4%). Apartment prices also did not become more expensive in Flanders (-0.5%) and Wallonia (-0.8%), with the price for an apartment in Brussels being only 0.4% higher. The larger cities are not showing any different trends from the rest of Belgium. While the price difference between city centers and the rest of Flanders has indeed increased in recent years, the cooling down seems to be equally pronounced everywhere.
Hot or cold?
Despite the clear pattern that we can identify in our analyses, opinions regarding whether or not the market is cooling down were divided throughout the year. To understand this mixed reporting, an important distinction must be made between the evolution of asking prices and sales prices. There is an estimated delay of 4 to 6 months between listing a property online and finalising the transaction, which means that the trend in asking prices precedes that of sales prices. Therefore, we can deduce that reports earlier this year about a cooling down in the first part of the year—based on sales prices—are most likely attributed to the delay in (asking) prices at the end of 2021. By the same logic, we can anticipate that the latest sales figures currently may not indicate a cooling down of the market. However, based on our asking price data, we can predict that sales prices will also slow down soon.
Tight budgets are hindering buyers
The borrowing capacity of households plays a significant role in the observed price changes. When households have a larger budget at their disposal, housing prices will start to rise due to market competition. The reverse is also true: when households can borrow less, more expensive homes become unaffordable, and prices will necessarily stop rising or even have to decline.
Likely, potential buyers in the first half of 2022 were driven by the rapidly increasing interest rates in the hope of securing a more advantageous loan. In the meantime, the average interest rate has doubled compared to the beginning of the year, making borrowing less appealing. Furthermore, inflation reached its highest level in 46 years after a continuous rise throughout the year. This was largely driven by a significant increase in energy prices, with a provisional peak in September when prices were almost 5 times higher than a year earlier. The cold spell in December will put pressure on energy prices once again. All these factors contribute to the reduced budget of households, which ultimately can explain why a market price stagnation has occurred.
Outlook 2023: buyer’s market
If current trends continue, the residential housing market in Belgium will transition from a seller's market to a buyer's market. The ongoing energy crisis and the associated high inflation will make potential buyers think twice before taking out a loan. The years of favourable interest rates for home loans are also definitively behind us. (Although it should be noted here that from a historical perspective, we are still at historically low levels). In other words, the demand for homes will decrease due to the reduced borrowing capacity of households. Buyers will thus have more decision-making power in a market where prices are more stable, and properties remain listed online for longer.
Read more from the annual report 2022