Belgian real estate market to rebound in 2025

According to our ING consumer survey (October 2024), over half of the respondents believe that housing, whether renting or buying, is already unaffordable. Additionally, most Belgians expect the affordability of energy-efficient homes to worsen due to stricter environmental legislation, with only 34% sharing similar concerns for energy-consuming homes. According to our respondents, the future of housing appears challenging, especially for young buyers. Notably, 63% believe that young buyers will face greater difficulties in acquiring housing. This sentiment is more pronounced among older generations, with concerns growing as age increases.

In recent years, interest rate increases by the European Central Bank have led to a sharp rise in long-term mortgage rates, negatively affecting buyers' borrowing capacity and making home purchases difficult or even impossible for many new buyers. However, in June 2024, the ECB began cutting deposit rates again, leading to a decline in mortgage rates. While short rates are expected to fall further, we anticipate a stabilisation of long-term interest rates in 2025, with a potential slight increase during the year. As future ECB rate cuts are already reflected in current long-term rates, we do not expect a return to the extremely low levels seen before 2022.

The decline in mortgage rates in 2024 has improved housing affordability, allowing potential buyers to borrow more for the same monthly payment. This increased affordability has positively impacted the market, significantly boosting transaction numbers. As interest rates stabilise, we expect many buyers to abandon their wait-and-see approach, realising that rates will not return to pre-2022 lows. Consequently, we anticipate a stronger increase in transactions in 2025, which will support price growth.

The mandatory renovation requirement in Flanders has caused a price difference between energy-efficient and energy-consuming homes. Measures announced by the government will impact property prices and willingness to renovate. From 2025, Flanders' registration fees for primary residences will decrease from 3% to 2%, and Wallonia's fees will drop from 12.5% to 3%, likely raising property prices and benefiting sellers. Nevertheless, the abolishment of certain benefits in both regions will moderate the price increases resulting from the registration fee reductions.  

Prices for energy-efficient homes have risen faster than energy-consuming ones and this trend is expected to continue, although the relaxation of renovation obligations may lead to stronger price increases for energy-consuming homes. However, this effect will be tempered by eliminating reduced registration fees and additional incentives for homes with poor energy scores, maintaining the price growth differential between energy-efficient and energy-consuming homes.

Overall, after an expected modest price increase of 0.5% in 2024, Belgium's residential real estate prices are expected to grow by 3% in 2025 and 3.8% in 2026, driven by stable mortgage rates, wage indexation, fee reductions, housing shortages, and legislative changes.

You can find the full version of this study in French here and in Dutch here.