Update on Real Estate Market
After a period of strong price increases, we have seen somewhat limited growth in real estate prices in recent years. The past few years can also be marked as a fairly turbulent period in real estate, characterized by rising interest rates and construction costs.
In the first quarter of 2025 compared to the first quarter of 2024, we saw a continuation of these moderate increases in Flanders. Apartment prices decreased by 1.1%, while house prices experienced an increase of 3.34%. Notably, the province of Limburg has seen the strongest price increases over the past five years, with a rise of 14.6% for apartments and 24.2% for houses. In Brussels, prices rose last year (Q1 2024 – Q1 2025) by 1.4% for apartments and 3.4% for houses. Wallonia experienced an even stronger increase (Q1 2024 – Q1 2025), with 4% for apartments and a remarkable 18% for houses. In the province of Luxembourg, price increases have been the strongest over the past five years, with a rise of 26.8% for apartments and 29.7% for houses. The strong price increases in Wallonia are mainly due to the reduction of registration fees from 12.5% to 3% if certain conditions are met. As a result, some buyers delayed purchasing a home until the first quarter of 2025.
Except for Wallonia, where a change in taxation drove prices up significantly, we notice that the other regions continue to be characterized by limited increases. Overall, it is expected that real estate prices will continue to rise, but again moderately. A major driver of the golden years of real estate was the interest rates that had been declining for decades, which increased buyers' borrowing capacity and led to a rise in real estate prices. Due to geopolitical developments and rising inflation, this declining interest rate trend was reversed in March 2022. This put pressure on the borrowing capacity of households and led to a decrease in demand and the number of transactions. At the end of 2023, there was again a slight decrease in interest rates, which provided some room for higher borrowing capacity, but a further decline to the historically low interest rates pre-2022 is not directly expected. Declining interest rates will no longer be the major driver of rising real estate prices. However, the current trend of longer borrowing terms, up to 25 years, still provides some breathing space for buyers in terms of borrowing capacity.
Despite expectations that interest rates will not drop spectacularly, there remains price pressure on the market. The shortage in supply, both in social housing, the private rental market, and the purchase market, continues to support real estate prices today. The main aspects here are the limited availability of land and regulations. Cumbersome, lengthy permit procedures remain a challenge for project developers, slowing down the pace of new construction projects. Although the increase in construction costs seems to be tempering, labor costs continue to weigh heavily on overall construction costs, affecting the costs for new construction and renovation.
A notable trend in the real estate market is "apartmentization." This trend is partly driven by the aging population, where partners who are left alone due to a spouse's death tend to move into an apartment more quickly. This demographic shift contributes to the demand for apartments, and this trend is expected to continue. Additionally, the demand for rental properties, often apartments, continues to rise. A less strong urge for property ownership among young people, fragmentation of households, and the associated limited financial capabilities, higher interest rates, and shortages in social housing are leading to an increase in the rental market, with more candidates waiting in line for a property that becomes available on the rental market.
Another ongoing trend today is the lagging sale of new constructions. The share of new construction sold decreased from 20% to 13.5% in 2023 and further to 8.3% in Q1 2025. This suggests that there is a discrepancy between the production of new homes and the demand for such homes, possibly influenced by rising construction costs and permit challenges.
In summary, the Belgian real estate market continues to be characterized by limited price increases, influenced by interest rate developments, demographic changes, and market challenges such as permit procedures and construction costs. Despite the slowdown in price increases, the market still offers opportunities and challenges for buyers, investors, and developers. Expectations for the future point to a continuation of these trends, where strategic adjustments and innovations are necessary to allow the market to grow sustainably.