What is the impact of COVID-19 on the real estate market?
“Stay at home” is undoubtedly the statement of 2020. But all that staying at home also has an effect on our homes. Everything came to a halt during the lockdown. Afterwards, there was a rush on real estate resulting in an overheated market. What's next? This is the key question of our podcast with Filip Dewaele, CEO of Dewaele real estate, Véronique Goossens, Head of Research at the Belfius Economic Studies Department, and Davy Demuynck, CEO of ION.
Real estate prices increased after the lockdown. In the third quarter, a house in Flanders cost on average 5.5% more than last year. For apartments, the increase was even 6%. Do you feel the prices are soaring?
Filip: “Contrary to our expectations, there was a lot of interest in real estate after the lockdown. People have had time to think about it, talk about it, and prepare. And when there are a lot of buyers, prices will go up.”
Davy: “Shortly after the lockdown, we saw a decline in sales for some of our projects, while for other projects, we saw sharply rising figures. Demand was especially high for second homes on the coast and investment real estate in a limited price category. In particular, there has been a decline in the sales of off-plan development projects. But as a company, you can’t change the market. We mainly think about the future and the types of products we should develop to meet the demand. ”
Véronique: “There has obviously been a rush. We anticipate that the real estate market will start a cooling-down period this fall, but we don’t think that house prices will fall sharply. People are experiencing more fears. Fear of the virus, fear of losing their jobs, etc.
That’s why we are still anticipating a price drop of half a percent this year. We are not expecting a major decline because various factors are supporting the market very well. On the one hand, borrowing is very cheap because of the extremely low interest rates. On the other hand, there is a massive housing shortage. The baby-boom generation wants to stay longer in their own homes, and the number of single-parent families is increasing.
Since May, there has been an increase in the sale of homes in the slightly higher price range. People attach more importance to having a yard and may require more office space. Have you noticed this in the demand for new developments? Or in sales?
Davy: “I think it only has a limited impact because eventually, it comes down to affordability. Your wallet decides what you can afford. We’ve been focusing on high-quality housing with spacious terraces for years. Apartments with limited private outdoor areas are more affordable. In recent years, we have been putting major efforts into public spaces. We make sure that our large-scale projects have pleasant settings with green surroundings. I do want to emphasize affordability. In recent years, people were able to afford the rising prices because of low-cost financing. The interest rates just kept dropping. I agree with the people around this table that we can expect a relative shift from home buying to home rental.
Traditionally, Belgium has been a buyers' market, but we’re now approaching a situation in which 30% will have to rent. I believe that this will increase to 50% in the coming years. We believe there are advantages of focusing on rental property, which will still be in demand. There are still investors who have confidence in real estate, so long as you can provide them with a full-service solution. Many people have bad experiences with rental properties because they have to solve any problems themselves. Various players are responding to this by providing full-service solutions to investors.
Filip, as a real estate agent, have you noticed a rising demand for rental property?
Filip: “The rental market is indeed growing. This is due to budgetary aspects, but the government has also played a role. In the past, the government relied on home-ownership to solve pension issues. But to be able to increase labor mobility, you need more people renting. This will help to solve traffic congestion problems because tenants can move closer to their work. Politicians have already made that switch. It was one of the reasons for last year’s abolition of the home bonus.”
Véronique: “Although the rental market will remain buoyant, I believe an increase to 50% is an overestimation. I cannot see it evolving that strongly, but many young people are indeed finding it hard to buy a home. On the other hand, young people are a lot more flexible. They readily switch between types of jobs and activities, take career breaks, and so on.
Filip: It is true that young people are flexible when renting in big cities. But as soon as they settle down and start families, they will go back to being true Flemings with ‘traditional homes.’ A switch to 50% renters won’t happen overnight. But the trend of more owners than renters has been totally reversed.