The real estate market seems to have stabilized in the second half of last year. That is the conclusion of the ERA real estate barometer. However, sellers with the best energy label A receive a lot more money than sellers of a similar house with label D.
Zero growth in house prices
At first glance, 2022 appears to have been a year like the one before for the real estate market. The rise in house and apartment prices that we have seen for several years now seems to have continued. Homes were on average 6.1 percent more expensive last year than in 2021, apartments became 4.8 percent more expensive. This is evident from the annual ERA real estate barometer. In that barometer, economist Sven Damen (UAntwerp) compares the more than 60,000 transactions that the largest brokerage group in Flanders has done over the past eighteen years.
Although that average price over a whole year hides important shifts. Growth for both apartments and houses came to a standstill in the second half of the year. For example, the average house price rose by 0.5 percent from the second to the fourth quarter. That is why ERA CEO Johan Krijgsman speaks of “zero growth” in house prices. “There is no doubt that the real estate market is slowing down.”
“That is not surprising,” says Damen. “In that period, interest rates also rose sharply (the ten-year long-term interest rate is now regarding 3 percent, in June it was 1.6 percent, in January 2022 0.2 percent, PG). We know from research that there is a strong relationship between mortgage interest rates and real estate prices.” When borrowing from the bank becomes more expensive, potential buyers can spend less on a home. According to Krijgsman and Damen, that also makes it so difficult to make predictions for the coming year: a great deal will depend on how (long-term) interest rates evolve.
It is striking, by the way: since the beginning of the measurements with the data from ERA, the difference between the price rises of homes and inflation has never been greater. Last year, the average inflation was 9.6 percent. That is well above the average price increases of houses (6.1 percent) and apartments (4.8 percent).
Another sign that the real estate market cooled down a bit in the second half of the year: on average, houses remained for sale longer than in 2021. At the beginning of 2022, this was 81 days. By the end of the year, houses had been on the market for 91 days. “That is certainly not a sign that the market is in crisis, but houses that are more difficult to sell clearly stay longer,” says Krijgsman.
EPC value as important as previous years
Since the war in Ukraine sent energy prices through the roof, we have all become much more aware of the cost of a warm house. Nothing is as important for this as the energy label of the home.
Unsurprisingly, this also translates into a higher price for better insulated homes. Last year, a house with EPC label A cost an average of 17.9 percent more than a similar house with label D.
Homes with label E (-4.9 percent) and label F (-8.6 percent) were on average worth less than label D. This also has a logical explanation. From 1 January 2023, a renovation obligation applies to those who buy a house or apartment with these energy labels. The buyer of such a building must raise it to at least an EPC label D within five years, otherwise he risks a fine.
But contrary to what is sometimes claimed, the real estate market has not been completely turned upside down by the high energy prices. Damen made the following comparison: if the EPC score of a home improves by 100 points, what effect does that have on the price? Such a house became 2.9 percent more expensive. “That is the same effect since 2016,” says Damen. “That makes sense in a way. A buyer of a home will never want to pay more for an energy-efficient home than the cost price of a less energy-efficient home plus the cost of insulating it.”
We want more space
Leuven remains the most expensive of all Flemish central cities. Antwerp is the second most expensive city to buy a home. Ghent and Ostend are in third and fourth place in Flanders. Those two are, incidentally, the only two of all Flemish central cities where the price for a house or apartment rose faster than in Leuven.
House prices – apartments were not included in this exercise – rose faster outside central cities. This is striking because it has been reversed for years. The turning point seems to be in 2021, just following the first corona waves. The hypothesis is that the successive lockdowns make sellers look fondly at open and green spaces.
“That is a fairly strong conclusion, because this was typically the other way around for corona,” says Damen. “We also see this reflected abroad. Now that people can work from home up to three days a week, the cost of commuting is also lower. So they are willing to pay more for a house ‘outside’. There is a clear relationship between the cost of commuting and the price people are willing to pay for a home. This has been demonstrated many times in scientific research.”
