2021 Outlook For Belgian And Dutch Housing Markets

The fall in the average mortgage interest rate, however, is also related to the macroprudential policy pursued by the National Bank of Belgium. Under new rules in force since January 2020, there are restrictions on the loan amount in relation to the value of the home (loan-to-value ratio). This ensures that banks grant fewer loans with very high loan-to-value ratios. As these new loans are less risky, they have a lower mortgage interest rate, and so the average mortgage interest rate falls.

A second factor contributing to the strong price growth has been the income supporting measures from the government. Income loss for households on a macroeconomic level was moderate due to these policies. The moratorium on mortgage payments also supported prices in ensuring fewer forced sales, which are generally a cause of downward price pressure.

Furthermore, those households that suffered loss of income as a result of the pandemic are generally not the households that are looking to buy a house. Home ownership is lower among lower income households, and the COVID-19 crisis has had a greater negative impact on sectors in which average wages are lower.

Lastly, we note that the low yield on bonds and high volatility of the stock market over 2020 made an investment in physical real estate more attractive for many Belgians. Hence, real estate investors also supported house prices.

Can this high house price growth continue?

The factors that influenced the high house price growth in Belgium in 2020 will fade over the coming months, we believe. The second wave of the pandemic and the negative effects of the first wave will cause unemployment to rise, even in sectors not directly affected by the pandemic, putting downward pressure on house prices.

The Belgian government’s income support measures are expected to become more targeted during the second wave and will inevitably result in a loss of income for a larger number of families. And the moratorium on mortgage interest payments will eventually expire. In addition, the strong house price increases will dampen the attractiveness of real estate for investors.

In 2021, we expect the real estate market to cool, with lower quarter-on-quarter growth figures. However, due to base effects, the expected growth for the full year is still high, at 3%.

The Netherlands

The Dutch housing market is still showing strength despite the COVID-19 crisis. Stable affordability, increased activity by investors and further tightening of the housing market explain why prices have on average increased by 7.8% on an annual basis (+6.9% in 2019). For 2021, we assume a cooling of the housing market, but the surrounding uncertainties are higher than normal. The pace of economic recovery and developments in confidence in the housing market and interest rates will largely determine the impact of the crisis on the housing market in 2021.

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