Is home ownership still affordable in Belgium?

The recent surge in residential property prices in Belgium after many decades of more or less continuous increases has reignited concerns over the affordability of home ownership for households. Although household disposable income has risen constantly for just over two decades, it has been outpaced by rising dwelling prices over the same period. Housing has not become correspondingly less affordable because mortgage interest rates have fallen significantly during that time, enhancing households’ ability to borrow.

The volume of new loans has been rising since 2015 even though the proportion of young borrowers (18‑34 years old) is down slightly. However, the percentage of loans with a high loan-to-value (LTV) ratio has declined. In view of the increase in property prices, that indicates more own funds are needed to buy a home. Although (young) households still have access to the mortgage market, they therefore have to make a bigger financial effort than before. That could oblige young people with no assets to contract loans involving higher repayment costs, buy a poorer quality home or one in an inferior location, or even resort to the rental market.

For a couple in full-time work earning the average wage, the cost of repaying a mortgage loan is still at a level that can be considered viable. However, it may be significantly higher for households in a less favourable financial situation, such as those without sufficient own funds. Moreover, the burden may be particularly high in some expensive urban centres such as Brussels, Ghent or Leuven.

The gap between the rate of home ownership of the wealthiest households and that of the less well off has been widening for almost 20 years.