This post is part of a series, check out the last two post if you want to know more about my search:
- Hunting for a house part 1: why do I need a change of scenery
- Hunting for a house part 2: what you need to pay attention to when searching for a house
Unfortunately I need to pause my house hunt just when I have more time to search. I work from home so I finally have enough time to go see houses in the evening, however right now all house viewings are illegal. Buying and selling is still allowed but who would place an offer on a house they have never seen? Private owners that need to sell fast do still allow viewings even though its illegal to go watch, but they are a minority.
I did go see one house when the lockdown still started. It was not very clear yet back then if it was illegal or not, although in all honesty it probably was, and it was a good house. I needed more time to think though and ended up not placing an offer. Something I sometimes regret still, not everything was perfect but it did tick a lot of my boxes.
Now I am just waiting as I see certain measures slowly getting lifted. Something tells me they cannot pause house sales forever but nothing is sure.
The Belgian housing market has seen a surge the last 10 years, but will it keep up now that we are going trough a crisis that we have not seen in decades?
Why the housing prices could go up in Belgium
People still need houses
Just like me there is a lot of people that are waiting anxiously until the market re-opens. Realtors claim they have a waiting list of 2500 people for certain houses(!). Once viewings are allowed again all those people will storm the market that could lead to a surge in prices. And even if the market is uncertain if you need a bigger place to live that need is not going to go overnight. People who have children might still urgently need a bigger place to live.
Wages have not dropped much (yet)
The government has been pumping money into the market like never before. Not only in Belgium but in Europe in general. It looks like they have some interest in increasing inflation themselves, and that would keep the current housing prices at the very least stable. In Belgium we have a system of temporary unemployment, additionally the Government gave extra bonuses to people in this system during the lockdown, this actually caused some people to earn more now that they are unemployed then before they were!
In the Belgian paper Het Laatste nieuws we read that Tim had 8 days of technical unemployment during the lockdown, because of that the government gave him an extra 380 EUR bonus, bringing his net wage to 2526, compared to 2174 before the crisis. Its a bit of a perverse system that people who work less earn more, and some people who still work normally work less. I count on it that this system will be corrected soon, as this debt that the Belgian state is accumulating now will need to be paid back sooner or later. But if it will not be corrected and free money is being pumped into the market we do risk a national inflation on much more then just the housing prices.
Realtors deny there will be a drop
To anyone who is willing to sell realtors promise a sellers they will still get a great price for their house. On the statements of anyone who is predicting a drop they continue to deny the drop and claim that the market is still a seller market with much more people eager to sell then to buy. Additionally history did prove them to be right, we have not seen a drop in the market since the 80’s and borrowing money remains to be cheap.
Why the housing prices could drop in Belgium
We no longer have any tax benefits for a first house
In 2019 the Government decided to remove all tax benefits you would get from buying a house. They predicted that this would at least cause a less sharper surge in housing prices then before. I can imagine that this will still have some effect. In my case I don’t care about this right now, as the Tax benefits for a second house are still there. Its a strange effect from having split responsibilities between the Federal and the Flemish states, and I do plan to keep my first apartment so I can leverage this tax benefit and to get some extra income from the rent of course.
We will go into a recession
By now its almost certain that the market will go into a recession. How badly will depend of how long the lock-down will take and if there is more waves of Corona coming our way. Until we have a vaccine we run the risk that things will get worse before they get better. The European commission even predicts that the recession will be bigger then in 2009. In 2009 the GDP of the EU dropped with 4.3%. The bank of America even predicts that the EU GDP could drop with as much as 8%. While the drop in Belgium will be bellow the average drop in the EU it will still be quite high.
Actual unemployment could rise
While the unemployment in Flanders before the crisis was about 3.5% before the lockdown, right now about 1 Million people are temporary unemployed. The question is if people will be able to hold those jobs after the lockdown without government support. At the very least people who were in this system for a while will not be so eager to invest large amounts of money into the housing market. They will want job stability before they make such permanent choices.
Death toll is higher because of Corona
This statement is a bit darker, however it must be said that the last 4 weeks as much people died from Corona then there would usually be deaths in one month. This could lead to more houses entering the market over the next year then there usually would.
At the same time we do not accept any asylum requests for a month already now. This will at least temporary lower the amount of new people into the market, not only in the short run, but I can imagine Europe’s borders being closed until at least September probably will also cause a drop in the mid-term.
Banks predict housing prices will fall
The big banks (KBC and ING) predict that in the worst case scenario that we have multiple Corona waves and lockdown prices will drop this year with 6% this year and 4% next year. Even in the best case scenario a drop of 3% this year and 2% next year are predicted. Which in my eyes is more a market that’s getting more stable rather then one that will drop. Then again its not the first time a drop was predicted and even in 2009 the prices did not drop. The last drop was in the 80’s during the recession.
Banks might be less tempted to loan out money when they get pushed into a situation where they are forced to extend loans for free. Something that the Belgian government have already suggested as a possible measure.
To be honest under the current circumstances its hard to see that the market would not at the very least stabilize and possibly see a small drop. But its hard to predict what the Belgian government will come up with. In any case there is no point to try to time the market if you really need a house and can afford it just go for it, no matter what the market is like. I’m bad at it, so when I find a house that meets my requirements I will still place an offer. Hopefully the market will re-open soon so I can continue my search!
Did you like my blog post? Want to follow me as I search the Belgian market for a house? Then subscribe and check how I buy (or fail to) a house in these troubling times and hopefully it will give some insight for those who just start or who are just interested to learn about the Belgian housing market.
6 thoughts on “Hunting for a house part 3: will housing prices in Belgium drop for the first time since 1983?”
Honestly, just like trying to time the financial market I believe trying to time the housing market is almost impossible. Human beings are irrational.
Theoretic models might make sense, but humans often don’t. There are just too many variables linked to us, humans, making it hard to make a reasonable guess. Even if it drops, something like 3 or even 10% seems more like a healthy correction before a new rise.
Either way, a very good write up thanks a lot and good luck with your search. It’s really interesting to follow.
I forgot to add that the Brussels government already changed the tax benefits a while ago. Some years later and we haven’t had a meaningful stop. The prices keep going up. So to me, that at least makes the tax benefit change a moot point.
Yeah I also don’t think there will be a big drop. 5% at the most, but even if there was no drop and the prices would just be stable for 1-2 years it would make me more comfortable in my search..
Its hard to think what the effect would have been on Brussels without the change in government, maybe the rise would have even been faster.. We won’t be sure until its the future..
I think it comes down to seeing a house that you like and fits your budget at that time. Speculating on a price drop is difficult. If someone buys the house Hike you wait, it is gone. In like stocks there is only one off each house. All the best with your search.