Housing prices fall by -8% in the Eurozone in 2023… But the value of housing in Belgium is not under pressure.

Housing prices in the Eurozone will fall over the next two years. The Netherlands and Germany are in the front line and should consider a -8% drop by the end of 2024. This is what emerges from our latest report on the outlook for the European real estate market. According to a study by Belfius, in Belgium there would be a downward correction of 2 to 3% in 2023 after a rise of 5% in 2022.

However, Belgian homeowners, who make up around 72% of the population, can be confident about the value of their home. Around 850,000 Belgians even own two or more homes. The real value of housing fell in 2022, as the nominal value increase of 6.1% during that year was compensated by an average inflation rate of 9.1%. The time to sell also increases, which means that the bargaining power of the seller has shrunk.

“But the nominal value of housing will hardly fall. This trend should continue in 2023. In the surrounding countries, there is reason to be more worried”, says Johan Geeroms, our Director Risk Underwriting Benelux. Germany will be hardest hit. The average value of homes there has increased by 50% over the past 7 years. In countries like Spain and Italy, the fall in prices remains limited. The Netherlands are also in the same boat as Germany.

In Belgium, most owners take out a tax-advantaged mortgage loan to acquire their home, part of which is financed by their own capital contribution, and where repayment is made on the basis of an annuity (payment of interest high and low capital repayments at the beginning of the loan and vice versa at the end). “The housing market remains fairly stable in Belgium with relatively few dramatic price fluctuations or corrections. However, we believe that the real estate market will calm down due to rising mortgage interest rates, high inflation and the energy crisis. We expect the increase in house prices in 2023 to be lower than inflation, without being able to predict at this stage whether there will also be a fall in average prices in euros,” says Johan Geeroms.

Due to the energy crisis and government directives to accelerate energy renovation, a divide has developed in the housing market.

On one side, there is coveted housing labeled CPE A or B, including new housing, but also houses renovated before the inflationary outbreak. According to the recent ERA barometer, from a study conducted by ERA with the University of Antwerp and KU Leuven, the highest energy score can increase the sale price of a quasi-key house by up to 18% for a new house labeled A compared to a house labeled CPE D. Those who can afford it will not hesitate to pay more, as it will save them the stress of renovation and give them peace of mind for coming years. In addition, all insulation materials have become considerably more expensive.

On the other side, there are the existing, dilapidated houses, which are not energy efficient and which must be renovated in an energy efficient way within 5 years. People are hesitant to buy homes labeled F or E. This is because of the obligation to renovate, the rise in interest rates on loans and inflation which is driving up the prices of building and isolation materials. A recent ING survey shows that 50% of Belgians do not want to buy a home with a bad CPE score, and 36% only if there is still enough budget for energy renovation. The gap between these two extreme housing types therefore also results in a striking price difference based on the CPE score.

“Because of the oversupply of these dilapidated homes, the buyer's room for negotiation is increasing and I see the price of this type of housing falling significantly in the long term. More and more homes are also being demolished to be sold as building land, with the possibility of building a new home at the 6% VAT rate. For young people and vulnerable households, however, housing affordability remains an issue that the government will also need to address,” says Johan Geeroms.