Belgian real estate purchasing power has fallen by 25 m² since January 2022. Today, an average Belgian household can purchase a home of 89 m². These are the findings of a European study conducted by real estate website Immoweb. Despite this sharp decline, Belgium still has an advantage over its neighboring countries: in France (53 m²) and Germany (58 m²) purchasing power is considerably lower.
We see the same trend in the capitals, where Brussels, with 62 m², has the best purchasing power of the European capitals. ” The fact that the purchasing power of Belgian households remains high compared to that of neighboring countries is one of the reasons why real estate prices have held up so well so far. In other countries, where real estate purchasing power is lower, the additional decline in purchasing power puts even greater pressure on prices, so that we see more price corrections,” says Jonathan Frisch, real estate economist at Immoweb.
Real estate purchasing power is declining throughout Europe. This means that European households can purchase a smaller home than before. This evolution is due to the increase in interest rates and the decrease in the number of loans granted by the banks. Rising interest rates (from 1% to 4% on average depending on the country) have increased the cost of mortgages, leading to a sharp decline in household borrowing capacity by -15% to -30% depending on the country.
As a result of that decline in borrowing capacity, households are forced to purchase smaller properties than before, or they are forced to withdraw from the real estate market until conditions are more favorable to purchase. “In Belgium, the purchasing power of a home has fallen from 114 m² in January 2022 to 89 m² today for a couple with a median income and without children. That is a decrease of 25 m² or 22%,” says Jonathan Frisch, real estate economist at Immoweb .
“In addition to the interest rate increase, the number of loans granted has also fallen sharply because banks are applying stricter conditions. In Belgium, for example, the number of loans granted fell by 27% in the period July 2022 to July 2023.”
Housing Purchasing Power & evolution in European countries
Declining purchasing power in neighboring countries
In our neighboring countries we see a similar decline as in Belgium. In Germany, a household could still buy a house of 69 m² at the beginning of last year, but can now only afford 58 m² (-15%). In Luxembourg, the purchasing power of real estate has fallen from 45 m² in January 2022 to 37 m² now (-18%). The decline is smaller in Germany and Luxembourg, because prices there have fallen by 6.7% and 6.5% respectively. This decline has partially offset the increase in mortgage costs, thereby absorbing the loss of purchasing power. France is the only neighboring country where the percentage decline in purchasing power is greater than in Belgium. There, real estate purchasing power fell from 70 m² to 53 m², a drop of 24%.
Brussels is the most affordable capital
Although real estate purchasing power in Belgium is declining, it remains considerably higher than in our neighboring countries. This is due to our relatively low average price per square meter (€2,300/m²) and our high median income compared to neighboring countries.
This is also reflected in the capitals, where Brussels has by far the largest purchasing power with 62 m². That is almost twice as much as Berlin (35 m²) and almost four times as much as Paris (17 m²). Real estate is also more affordable for the average household in Luxembourg (26 m²).
Housing Purchasing Power & evolution in European countries
The impact of purchasing power on real estate prices
One of the reasons why price corrections in our country are less pronounced than in other countries is our relatively high real estate purchasing power. In neighboring countries it is much lower, which means that real estate prices have less room to rise further. Prices are already high in relation to people’s income. Moreover, they are coming under even more pressure due to rising interest rates. This leads to corrections in price dynamics in all countries surveyed, and in particular to declines over the past year in France (-0.6%), Luxembourg (-3.5%) and Germany (-6%).
“We see a correlation between real estate purchasing power and price corrections,” says Jonathan Frisch, real estate economist at Immoweb.
“The countries where real estate purchasing power was the lowest at the beginning of 2022 are also the countries where the decline in house prices is the strongest and fastest. This is not illogical, as households in these countries had already reached or very much reached their maximum borrowing capacity. were close. So they cannot spend even more income on purchasing a home. Rising interest rates therefore put even more pressure on prices in these countries. Belgium, on the other hand, had much greater purchasing power before 2022, and that is why we see that real estate prices in Our country is holding up ‘better’ than in other countries, even if we see a slowdown.”
The effect of purchasing power on real estate prices can also be felt within our national borders.
“We see that house price growth is slowing more quickly in urban areas, which are less affordable due to higher prices. Our Price Meter for the third quarter also shows that Flanders has overtaken Brussels in terms of house price growth. The stronger increase in Flanders can be explained by the more rapidly rising house prices in rural areas. That is where purchasing power is often highest and people have not yet reached their maximum borrowing capacity, despite the increased interest rates,” concludes Jonathan Frisch.
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