Those who want to buy or rent a home are confronted with skyrocketing property prices. It is becoming very difficult to enter the housing market without a solid financial boost, particularly for young people and people with more limited financial means. Can housing become affordable again? Let’s ask Alexis Spaas, Business Unit Manager at ION, Frédéric Sohet, Managing Partner Financial Advisory Real Estate at Deloitte Belgium, and Jens Aerts, urban engineer and architect at BUUR Part of Sweco.
Alexis: “First of all, Belgium is experiencing strong demographic growth. By 2030, we expect no less than 600,000 extra inhabitants on Belgian soil. Secondly, there is of course the phenomenon of the ageing population, and we are witnessing a trend towards smaller households. These factors result in an enormous rise in the demand for housing. In addition, the price of raw materials is increasing significantly, which has an immense impact on construction costs.”
Frédéric, are we seeing a similar evolution in our neighbouring countries?
Frédéric: “At Deloitte, we publish our European Property Index every year, in which we compare Belgian property prices with those in other countries. To buy a 70-square-metre flat in Brussels, an average family in Belgium would need 4.2 times their gross annual salary to do so. In the United Kingdom, this goes up to 6.6 times and in Poland even up to 7.7 times. In Belgium, interest rates have been decreasing for years, creating a very specific economic and financial environment. Purchase prices have risen very sharply, making it much more difficult to buy a first home than a few years ago. At the same time, it is becoming less interesting to leave your money on your bank account, which is why some investors are turning to the property market, renting out their properties and making do with lower yields. Purchase prices have risen much more than rental prices.”
Jens: “To solve this, the offer must change. On a provincial and urban level, we have already witnessed quite a few initiatives to optimise the population density. It is perfectly feasible to build flats in certain locations in a village or municipality without affecting the local character. Likewise, we must be able to appeal to property developers and the government to keep housing affordable. Belgium has a long-standing tradition of providing social housing, but we are often faced with a lack of available plots, and the efficiency of building and then managing that housing afterwards also leaves much to be desired. In the past, Belgium used to opt for individual property developers. Today, we are seeing more professional developers who think on a large scale and can also handle larger and more complex projects.”
Alexis: “We are convinced that we can positively influence prices by increasing the offer, and we strongly believe in mixed residential projects. We are currently working on a large-scale, varied project in Leuven, which includes a residential care centre, assisted living facilities, student housing, traditional flats and 10 percent social housing. We call on the authorities to deal with this in a transparent way, so that it is clear from the start what is expected in terms of social housing and other aspects. In this way, it can be taken into account from the moment the project is designed and developed.”
Frédéric, you are also studying this issue and you are very knowledgeable about the construction sector. Where do you see opportunities or solutions?
Frédéric: “It’s a complex problem that requires the public and private sectors to work hand in hand to find a solution. On the one hand, we have to focus on the local dynamics of the real-estate market, which is completely different in Leuven than in Antwerp, for example. On the other hand, I would also like to highlight the climate objectives that we must achieve by 2050. Through these objectives, we are taking an important step towards sustainability, but this comes at a cost, of course. I personally have been advocating the renovation of existing social housing for years. At the moment, these renovation costs are borne by the social tenants and that is something the government needs to address. The third point is taxation, which can become an important incentive. I am thinking of VAT adjustments or property tax adjustments for sustainable construction. And by this I do not mean sustainable, eco-friendly construction only, but also sustainable and financially viable construction. Moreover, we are seeing a solid trend towards uncoupling plot ownership from building ownership, which is another factor that helps ensure affordable housing.”
Jens: “I think it will all evolve towards a different way of cooperating and managing. For example, in Brussels there have been a number of interesting initiatives focusing on community land trusts, whereby the government remains the owner of the land and you only have to invest in the building, not in the land. Developers can also contribute to this form of affordable housing. I think that in Belgium more and more developers will shift their focus to long-term management, which will benefit the ultimate residents, regardless of whether they are tenants or owners.”
Is there enough land available to build affordable housing?
Jens: “That is a big issue. In order to achieve the climate objectives, we actually need a construction stop in Flanders. That’s why we have to cooperate more and make even clearer agreements to be able to develop projects with good density and affordability.”
Frédéric: “We also need to breathe new life into existing buildings with new uses. This includes converting offices into residential spaces. This is a trend that will probably continue, even if it is easier to switch uses in some buildings than in others.”
Alexis: “In this regard, there are certainly opportunities in Brussels, which still has a number of very monofunctional neighbourhoods such as the North Quarter, that is home almost exclusively to office buildings. There we are now seeing a trend towards transforming these offices into mixed projects with a residential component, and possibly also an office function or other functions that support the neighbourhood.”
Jens: “There are indeed still possibilities for densification in Brussels and Flanders. The key to success will be to keep an eye on both affordability and quality of life throughout the process.”
There are clearly a lot of initiatives on the table. What are the big stumbling blocks in a city like Brussels today?
Jens: “Brussels is currently catching up because people are aware that good planning is essential. It is also important for the authorities to invest in their spatial planning departments, because they will have to meet the demands of project developers with good ideas.”
Frederic: “There is a huge backlog, but the Brussels-Capital Region is not standing still. A lot of affordable housing has already been built. In Brussels, as well as in Flanders and Wallonia, we have noticed that the public sector is coming up with financial resources. In the past, people thought of the public sector in terms of social housing only. Now these public institutions sometimes enter into partnerships with private developers or buy directly from the market. These are other ways of subsidising affordable housing. So different types of steps are being taken to increase the offer.”
Alexis: “There are indeed many different initiatives and possibilities. The system of social rental agencies also makes social housing interesting for project developers and private investors. This has been clearly proven over the last 10 years. In Brussels, every year, 9 percent of additional social housing is built by private parties. These properties are rented out long-term by social rental agencies. This is a profitable approach, also for developers and investors who are satisfied with a return of one, two or three percent per year. Since all the management is taken care of by social rental agencies, you are guaranteed a long-term rental return.”
So many positive initiatives in which you all contribute your expertise. It is clear that a conscious effort is being made to move towards more affordable housing.