Belgian housing market strongly overvalued

According to the Price Observatory’s quarterly report, published by the Belgian Federal Institute of National Accounts (INR), real estate in Belgium is 9% overvalued. The figures do not take into account the quality of the houses, but their net worth compared to average incomes. The report also indicates that Belgium is more susceptible to falling prices than neighbouring countries, writes De Standaard.

According to the Organisation for Economic Co-operation and Development (OECD), the housing market in Belgium is even more overvalued, even by as much as 50%, because incomes have not risen nearly as quickly as house prices. The OECD studies, however, do not take into account interest rates, which are currently at a historic low, making mortgage loans more affordable than ever.

The Price Observatory did take interest rates into account, and therefore came up with a total overvaluation of 9%, much higher than in neighbouring countries, where the housing market is mostly undervalued. In the Netherlands and France, for example, home prices are about 14% undervalued; in Germany, 40%.

This means that Belgium is more sensitive to drastically falling prices, which is also confirmed by a study by rating agency Standard & Poor. According to the study, should interest rates increase by 1%, house prices would fall nowhere stronger than in Belgium, with the average value of a home dropping by 13% in two years.