“The Belgian new housing market is in the grip of a deep and prolonged crisis, triggered by the economic shocks of 2022.”
A long and deep crisis for new housing in Belgium.
Following the outbreak of war in Ukraine and the sharp rise in prices and interest rates that followed, new housing entered a recession in 2022.
The National Accounts Institute estimates that investment in new housing fell by 4.3%. At the same time, the number of permits for new dwellings fell by 12%. And this was only the beginning.
This fall in the number of authorised dwellings heralded a further decline in investment in new housing in 2023. A further fall of 4.5% was then observed. In addition, the number of new authorised dwellings for the year as a whole fell even further.
There were a number of signs that the decline in new housing permits had come to an end in 2023. The general climate was no longer one of anxiety, household confidence had returned to a level above the long-term average, inflation was falling, disposable income was rising, and so on. And the monthly profile of building permits for housing issued during 2023 showed a slight increase.
However, the number of new houses authorised started to fall again in the first half of the year 2024, once again showing a marked decline. As a result, the number of new dwellings authorised in 2024 is expected to be around 25% lower than in 2021. The decline in housing investment is also expected to continue in 2024 and in 2025.
This further fall in building permits raises the question of whether demand for new housing has already fully incorporated the current level of construction costs and mortgage interest rates, both of which are higher than before 2022. We can assume that the answer is yes, and that this fall is merely a bump in the road linked to the fact that the fall in mortgage rates that began at the end of 2023 has created a waiting position, in the hope that they will return to their pre-2022 level. This wait-and-see attitude is likely to be short-lived, as it is clear that the outlook for interest rates is not for a return to this level.
If, on the other hand, the fall in demand for new dwellings recorded at the start of 2024 is due to the fact that it had not yet fully absorbed the current level of construction costs and mortgage rates, we can expect the decline in investment in new houses to be even greater and longer. In other words, this segment of the market could be in recession for more than four years …
