xpats.com

So what's your question? Or is it just another ranting on Belgium?

They were undervalued 30 years ago, not overvalued now.

You will never know; one reason the UK market boomed is the amount of price transparency in the UK housing market. The widespread use of estate agents means everyone can see what prices are available and take advantage of the rises.

In Belgium, market penetration of estate agent is low, most transactions are done privately with resultant low price transparency. Can you show a reliable index of house price inflation in Belgium? I have never seen one; the nearest thing is the annual 'Trends' survey...

That said, in my neck of the woods there are not shortage of houses for sale, and they seem to sell pretty quickly, suggesting little downward pressure.

Yes,true, you would have benefited up to 350% had you bought a house in 1990 and sold it in 2010, and it proves that the advice "buy it for the long term" was right.

What is your point or question then?

more a comment than a question - anyway asking questions on here usually gets u abused. my point is that as an expat you always hear how belgium is a solid investment, never been a boom here like in the UK. But the statistics show a bigger boom! Makes me think carefully about buying here.

btw@Bob - strange theory. boom caused by price transparency? so what caused the (bigger) boom in Belgium?

@simple - yields in Belgium are v low...

@OP

I am arguing that the boom in the Belgian market is more difficult to quantify; the information on data sources from Belgium is not stated; what's the sample size?

Another reason people are in for the long term here is the transaction cost and the tax liabilities triggered by selling in first 5 years of ownership. This in itself may constrict the number of dwellings on the market, and the scarcity pushes up the value of those homes sold (and included in data)

OP, yields in Belgium are low if you see the house as a pure investment, but once you factor in the opportunity cost of renting versus buying suddenly they become much more interesting.

Scenario A: I buy a house with a 20-year loan. After 20 years, I have a house and I have deducted loan interest from my declaration for 20 fiscal years.

Scenario B: I rent the same house. Rent is more or less as expensive as paying a loan. AFter 20 years, I have wasted 20 years worth of rent down the drain.

@Bob
Surely a more likely reason for 'price transparency' is that, in the UK, 90% of houses look exactly like the one next door and all those in the immediate vicinity so that seeing the asking price for any property immediately gives a guide to other properties in the same area.
In Belgium 90% of houses look nothing like the one next door or any of those in the immediate vicinity so that seeing the asking price for any property gives little clue whatever as to what other properties in the same area might sell for.
From my home in rural Flanders I can see around 25 other properties. Although around 20 of them are 3 bedroomed detached houses, there are no two that look even vaguely alike.

@ Simple, it's actually not so simple, and your post errs both by omission and commission.

For a start, I believe there's a cap on the amount of mortgage interest you can deduct for tax purposes. In response to a different question some time ago, a respondent characterised it as "peanuts" (about 1000 euros a year).

Secondly, and of course depending on interest rates during the period of your mortgage - usually 20 years, I believe - you can end up having forked out the double of the actual purchase price. In view of this, I am not so sure that 'rents are more or less as expensive as paying a loan'.

Thirdly, there are upfront taxes when you buy. I understand that these vary according to region, with the highest rate being around 16%. That can be a lot in cash terms, and it'd "dead" money.

Finally, the home owner is of course liable for keeping up the property. That too can represent a considerable sum over the years.

So I think the argument between buying and renting is more finally balanced than Simple suggests.

@fro

I take your point, but if you did try to buy you would get three wildly different prices. Without transparency, you have no idea whether the price you are asked for is realistic.

They may be different, but they all do the same function; you might be willing to pay a premium for what you prefer, but that is added value to the base price.

If you look out your window you might see BMWs, Skodas and Fords. All hold the same number of people, but they do not cost the same - but there is transparency in pricing.

It allows people to shop around, and why people feel Colryut is cheaper than Delhaize

@sowhat - the point is - should you buy now? the argument is that prices are coming out of a long boom similar to that in spain. Or do you believe that the past is a guide to the future?

@bob - your criticism of the price index sounds like a diversion. why call into question the economist's stats? aren't you a builder? :)) (ok don't take that too seriously) even if you were right, is this 'problem' likely to significantly call into question the 350% boom? (wouldn't errors be random?)

@simple - yield is a perfectly sensible way to measure whether houses are fairly valued and one that is used by professionals worldwide. your understanding of opportunity cost seems simplistic and seems to assume that rent is 'wasted money' while mortgage payments are tax deductible (which of course they are for some people). Don't forget (this is just one factor) that you need to account for the opportunity cost of not saving i.e. the interest rate your deposit, plus any excess of rent above mortgage payments (one of the two factors is highly likely to be pretty big).

anyway, the point is, houses are overvalued here big time.

@DrGreenspan

An important consideration in renatl properties in Belgium is that you only pay tax on the revenue cadastral; this makes it a very attractive source of income.

On the other hand, if you rent the property you cannot offset upkeep and repair costs as you can in UK, which is why so many Belgian rental properties are in poor condition - it is paid out of net income, not gross, so people don't do it until they absolutely have to

On the purchase tax, there is an allowance made for that in your income tax; if you sell within the first 5 years, you have to repay (although not sure if it is pro-rata)

Dr Greenspan, of course I made it very simple, but to get back on your points, interest can be deducted up to 3000 EUR a year AFTER the bottom line, so it is peanuts per se but not in context, interest rates are usually fixed at the start, you may pay something more but never the double. And I believe in the wisdom of crowds, so if a lot of informed consumers make the choice of buying versus renting, there must be some advantage in doing so.

I'm sure all the people who have bought property in the last few years really want the fact that they are going to lose money/have paid over the odds shoved in their faces. Scare-mongering at its best.

come off it, Simple. Firstly, I wasn't talking about interest rates doubling, I was saying that if you take out a 20 year mortgage at say 5% you would, at the end of the loan period, have paid out in total roughly double the purchase price of the property. As for the wisdom of crowds, well, with the high level of indebtedness we've seen where the wisdom of crowds can get you. In any case, many, many people - almost a crowd in fact - do rent in Belgium (and even more do so in countries like Germany).

@ Bob the Builder, I wasn't talking about buy to let, the question was about buying for yourself. So your point about not paying tax on rental income is correct but irrelevant. Ditto the point about getting back part of the taxes/fees upon purchase, because i'm talking about buying a property and staying in it for the entire period of the mortgage.

Finally, @ for goodness sake!, why are the contents of this threas "scare-mongering"? I don't see anything scary, I just see a quite civilised discussion on the merits of buying or renting and on the past and possible future evolution of property prices. Or perhaps you scare easily?

Dr Greenspan, nope. A 5% fixed rate for a loan of 200.000 EUR over 20 years will lead to a total payment of about 300.000 EUR, nowhere near double the amount loaned. 300.000 EUR means 1250 EUR per month. As for the wisdom of crowds, private indebtedness tends to be linked with credit cards and smaller purchases, so it's safe to assume that housing, at least in this neck of the woods, is a pretty rational market. We can always agree to disagree :)

"I believe in the wisdom of crowds" - I think that bit of investment philosophy speaks for itself.

"sure all the people who have bought property in the last few years really want the fact that they are going to lose money/have paid over the odds" - amazing how people are so sensitive on this subject. what about those who were thinking of buying? or should they lose money to, for the sake of those who already have?!

I don't have an opinion on short term prices, I only wanted to point out the inconsistency between the huge ramp in prices, and the rhetoric you always here from the usual suspects about how its so sensible to invest here.

@OP

Indeed I am no builder. However in my day job I have had a run in recently in the Economist and sloppy use of data...even when their errors were pointed out (misquoting government statistics) they declined to make a correction.

So forgive me if I do not take the Economist data as a given

when I looked at the table it seemed to me that the house prices in Belgium rose less than those in France and the UK in the period 2002-.
Where was the OP looking?

"the point is, houses are overvalued here big time"

The VALUE of a house is what someone will pay for it.

yes, j, as long as you factor in the herd effect.

Well, Simple, the truer figure is about 316.000 euros, representing 63% over the purchase price. Not double, though, I agree.

I doubt if too many of the posters here would want the sort of house (including its location) you'd get for 200000. Let's assume a more likely purchase price of 450000. Total repayment cost over 20 years would be about 712000, ie you've paid out an extra 262000 on top of the purchase price for the privilege of being an owner. Monthly repayments would be a whisker under 3000 a month, which would buy you a lot of rent and then some.

PS - this is getting boring. Can we agree on that as well?

But to go back a step. Assume taxes/fees of as little as 12% on your purchase price of 450000. That's another 54000, bring your total cost for the period up to 766000 (= +70% of your purchase price).

Oh yes Dr Greenspan, this is getting boring indeed. Let's get out of here, I'll buy you a pint. But while we walk to the pub, consider this: a lot of young people buy a 200.000 EUR apartment with a 100% loan, but nobody buys a 450.000 house with a 100% loan. Most of the times, they sell the first apartment they bought and put the money in the house purchase, bringing down the amount loaned to usually around half of the purchase price. So your figures, while correct, are highly hypothetical.

this discussion threw more light than I expected on house prices in belgium

- one respondent doesnt want to hear bad news (scare-mongering)
- another doesnt trust the data
- one has very dodgy maths (please revise the concept of opp/cost)
- another believes that a sucker is always around the corner (house is what you pay for it)
and, ahem, two are trying to argue on the facts. 4 vs. 2, so irrationally wins to drive house prices higher another day :))

OP, join us at the pub. I can take notes on a beer mat while you explain to me the true concept of opportunity cost :)

is it possible that there is an increased demand now over 20 years ago compared to supply that would (partly) account for the price increase?

bit early for me, in the week I mean. I can drink from lunchtime. N.B. you r forgetting to factor in the opp/cost of the home downpayment (interest rates).

The difference between the 350% and 255% increase in Belgium and the UK,respectively during the same period?

Well,it has been a rather stable,even increase in Belgium throughout the period,but in the shape of a speculative increase/hike in the UK between 1997 and 2007.

Simple, are you the poster whom the OP accuses of dodgy maths?

To paraphrase, your argument runs as follows : many young couples buy appartments of 200000 euros with a 100% mortgage. They then go on to buy a 450000 euro house, but only take a mortgage for half that amount because the other half is paid for by the sale of their apartment.

Did I get that right?

For that argument to make hold water, this young couple - perhaps no longer so young, as we'll see - will have had to pay off the first mortgage entirely. If they haven't, most of the money from the sale of the apartment will go to liquidate the mortgage.

They will of course have to pay government taxes/fees twice, with - perhaps - a certain refund of the first lot of taxes/fees.

Lastly, I dispute your implication that people buy an apartment first and then move onto a house, certainly as far as expats are concerned. More typically, I think, expats will rent and then buy - and what they buy is more likely to be a 450000 euro house than a 200000 euro apartment. Sorry, but that's how it is.