Properties in Belgium continue to rise in cost despite high mortgage rates driving a drop in sales. However, in Brussels, the cost of one particular type of property has significantly decreased.
Sky-high mortgage rates have suppressed the buyer's appetite, resulting in real estate transactions falling across Belgium. This was expected to result in prices decreasing. House price inflation then fell to the lowest level in a decade, further adding to this forecast.
But so far, house prices have barely dropped. Recent figures published by Statbel, the Belgian statistics office, once again highlighted this phenomenon. The median price for a terraced or semi-detached house in Belgium was €264,500, almost €5,000 more than this time last year. Detached houses recorded a price increase of €5,000. Flats also became €5,000 more expensive, representing a 2.1% price increase.
Brussels, however – notoriously the most expensive place to buy in the country – recorded a drop in prices, with one particular property type plummeting. The median price of a detached house, costing more than €1 million for several years now, dramatically dropped to €850,000 (-21%).
More sensitive to higher mortgage rates
According to Bart van Opstal of the Federation of Notaries, this sheer drop is not entirely unexpected; it has much to do with rising interest rates. "The more expensive the property you buy, the greater the impact of an interest rate increase," he told The Brussels Times.
When buying a property with a fixed-rate mortgage for which 80% of the home's purchase value is borrowed, the interest rate increase weighs much heavier on the monthly budget when buying a house worth €600,000 compared to one of €300,000.
"Those properties in a higher price category are much more sensitive to interest rates than those in a lower price category because the impact on the lender's monthly income is much higher," Van Opstal said.
People receiving information on mortgage loans. Credit: Belga / Lieve Van Assche
Brussels has for years been the region with the most houses in the highest price category. This impacts the number of transactions, as fewer people can afford to buy houses in this price category, forcing sellers to rethink the purchasing price.
Immoweb Managing Director Piet Derriks also noted that Brussels, a region already characterised by high prices and relatively low purchasing power, holds a unique position in the real estate market.
"Buyers in Brussels are faced with major restrictions in terms of borrowing capacity. Against this background, changes in interest rates have an even greater impact on those looking to buy in our capital city," he explained.
"This is the main reason why prices have fallen more sharply in more expensive cities such as Brussels and Antwerp. In short, the smallest fluctuation in borrowing conditions has a significant impact on the real estate market in our cities."
Bargaining power
A second factor that has played a role in this large price drop is the energy efficiency of properties in this housing category. Many require a great deal of work to increase their energy performance score, accompanied with a relatively hefty budget.
"In a market where there are fewer transactions, these additional costs are more likely to lead to negotiations between seller and buyer," Van Opstal said.
"One year ago, there was no margin to negotiate, because the market was so competitive. But now you see that that margin is there, especially in the higher price range. People are strongly negotiating these days, which means that prices in Brussels are coming under serious pressure."
Does that mean you can snap up a bargain in Brussels? Not really. "Brussels is still by far the most expensive region."
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While other areas of the market are similarly coming under pressure, such as outdated properties or those that have a renovation obligation as part of the energy efficiency, it is unlikely that they will experience a similar large drop in prices, or even that the average prices nationwide will drop at all.
"Even if there are fluctuations in the market, such as during the stock market crisis, Belgian real estate remains stable," Van Opstal said. "While property prices in other countries such as the Netherlands or the United Kingdom, can fluctuate dramatically, that hardly ever happens in Belgium as a whole."
