Residential segment set for further growth

Tim Harrup

The residential segment of the real estate market has become central over recent times. Real estate advisor Cushman & Wakefield has analysed the changing scene in Belgium and the underlying trends. C&W starts by saying, at a wider level, that the European living sector ended the year 2021 on a record-high note with total transaction volumes exceeding €100bn for the first time. Residential is now the most invested property type in Europe.

Cushman & Wakefield goes on to point out that in Belgium, this asset class is increasingly sought-after by investors, both national and international. A robust demographic growth, changing lifestyles’ patterns, rising purchase and rental prices are amongst the key drivers for growing interest in the residential market. However, important challenges emerge. Alongside current economic and geopolitical uncertainties, sky-high inflation and rising interest rates, the residential stock is ageing in Belgium. There is a need to adapt to new environmental standards to reach the EU objective of carbon neutrality by 2050.

The characteristics of the population are of course central to the residential market. As of 1st January 2022, the population of Belgium was around 11,579,000, compared with 11,521,000 a year earlier. This represents an increase of some 0.5% in one year. In the medium-term, growth is likely to be maintained at around 0.4% per year. By 2030, the Belgian population is likely to be 11,916,000, a growth of 2.9% (+ 337,000 inhabitants) compared with 2022. This demographic growth is also accompanied by changes in lifestyles, which is having an impact on the number of additional households expected each year: the splintering of family units and the emergence of new lifestyles, such as collective housing and co-living, could cause a revamping of the residential property landscape in the years to come.

Among other demographic factors to be taken into account are that the ageing of the population continues, despite the Covid-19 crisis, and should continue across the whole of the demographic projection period for the country’s three regions. The percentage of people aged 67 and over is currently 17% of the total population and is expected to reach 20% in 2030 (and 22% in 2040 with more than 25% in 2070). Brussels has the youngest population in Belgium, with 11.5% of its inhabitants over 67 years old at the time being and expected to reach 12.4% by 2030. Flanders has the most aged population with more than 18% of people being 67 years old and more and expected to exceed 21% by 2030.

In terms of the residential stock, C&W notes that existing stock on the residential market is fairly heterogeneous between the different regions of the country. Generally speaking, most of the stock was built prior to 1981 though important disparities are observed between Regions. Approximately 20% of residential stock in Wallonia dates from after 1981, while in Flanders this percentage rises to around 30%. In Brussels, on the other hand, only 6% of the stock was built post-1981. This means that given the new and increasingly strict environmental standards, there is a real challenge when it comes refurbishing this stock. And while real estate developers need to propose new residential units to the market, the role of the public authorities is crucial. Along with the definition of land use planning and the strategic development of the regions, cities and countryside, public authorities also deliver building permits.

And finally, on investment, C&W says that investment sales are becoming increasingly numerous, with Covid-19 redirecting national and international investors towards new categories of property. These investors are turning away somewhat from offices and retail to focus more on logistics and especially the residential market. Belgium is no exception, even though investors, especially international ones, continue to focus on Brussels and Antwerp only. As a result of this growing interest, investment volumes for residential properties increased gradually since 2016-2017 to reach new summit in 2021. Last year, around 290 million Euros were invested in the Belgian residential market (including student accommodation assets).