After a short period of stabilisation and even a slight decrease in property prices, the cost of buying a house or flat is once again on the rise. Coupled with a halt in interest rates dropping, it is putting pressure on purchasing power.
High mortgage rates and a worrying economic situation suppressed buyers' appetites last year, resulting in real estate transactions falling across Belgium. It was predicted this would spur a drop in prices. While Brussels saw a slight fall in house prices, most property prices still continued to rise.
Now, it seems any hope of a further decrease is dashed as property prices across the country continued to rise in the second quarter (+1.3%), confirming the upward trend of the first quarter (+1.1%), real estate platform Immoweb confirmed.
"This price rise can be explained by the fall in interest rates in late 2023," said Immoweb Managing Director Piet Derriks. After peaking at 3.9% in January after two years of sharp increases, interest rates began to decline, stabilising at around 3.4% in the previous quarter.
"This led to a recovery in purchasing power and consequently boosted demand at the beginning of the year." Immoweb also noted a significant decline in the stock of homes for sale on the market between January and April which pushed up prices.
However, this rise is still below the level seen in the first half of 2020 to 2022, when average prices increased by 3.3%.
Brussels market recovering
The national average price per square metre (m²) now sits at €2,313. The recorded price growth was strongest in Wallonia (+1.6%) when it comes to purchasing property. The average price per m² in Belgium's cheapest region is now €1,729.
The Brussels market is also picking up (+1.4%), after long trailing behind the other regions in price increase. The average cost per m² is €3,320. The biggest increase was recorded in the cost of houses (+2.1%) after the price decrease in 2023.
Flanders, which is the second most expensive region after Brussels, saw the most modest increase (+1.1%), bringing the average price to €2,458.
More locally, Walloon Brabant and Charleroi recorded the biggest increase in Wallonia (both +2.1% in the second quarter). In contrast, the cities of Liège and Namur showed a slight decrease (-0.3% and -0.4%, respectively). In Flanders, Mechelen recorded the biggest increase (+2.1%), while property prices in Ghent dropped by 2.1%.
Strain on purchasing power
When interest rates started to fall at the end of December 2023, this initially led to an increase in household purchasing power of 3 m² on average between December 2023 and April 2024.
However, the dynamic of increasing prices combined with the stabilisation of interest rates this quarter "put a brake on the increase in purchasing power" observed at the beginning of the year.
In June, purchasing power even fell by 1 m², however, this figure is still higher than at the same time last year (107 m² compared to 106 m²).
"This situation can be explained by the fact that the fall in interest rates at the beginning of the year did not continue in the second quarter, although the rise in prices persisted," added Immoweb real estate economist Jonathan Frisch.
He noted that the European Central Bank's future decisions on interest rates will have a "major impact on the future course of borrowing costs and thus on price trends and household purchasing power."
