With Real Estate Bubbles deflating in the USA, the UK, Spain and most countries in the World, it is now also happening in Belgium.

Posted December 2009

Posted July 15, 2009

• Belgian Real Estate rose 'proportionally' as much as in other countries. We have a Global Economy. For this reason alone, it is incorrect to pretend Belgian did not have a bubble. There is and was no such thing as a micro climate for Real Estate.

• Belgian Real Estate is compared to other countries, extremely expensive...and also 'old' Just check the examples below.

• Belgian Real Estate is a HOCG (High order Capital Good) and its real value will fall as a consequence of the recession/depression during the coming 5 years. During the recession, maintenance expenses and taxes rise and (Potential) Rental income falls in nominal terms. We are rather sure Belgian Authorities will impose Capital Gain tax and Wealth tax in the near future.

• Belgian Real Estate will fall as Long Term interest rates soar as a result of the (hyper)inflation. All Real Estate will.

• Belgian Real Estate is unable to keep up with the Inflation. Expressed in Real Money or Gold, Belgian Real estate sits in a solid Down trend

• Commercial Real Estate is the next shoe to drop. As the recession/depression gets worse, more and more commercial properties are "for Sale" and/or "for Rent"...but as there is NO demand, they stay vacant.

• Equities can correct in only months' time, Real Estate needs years. Compared to Equities (Equities also are Real Assets), it takes a lot longer for Real Estate to correct the incurred loss.

• Stocks are 'liquid' (contrary to Real Estate), assuming these are quoted on a major stock market (most are).

Posted January 10, 2009

After Euphoria comes denial and after denial comes panic. Only when we see panic is the time to buy. Japan's house prices peaked in 1991 and 18 years later still stand an average 60% below their peak.

Posted December 22, 2008

Where is the idiot pretending there is no Real Estate bubble in Belgium? According to inside information the Belgian bubble has already busted.

Updated December 27, 2008

Not only do prices of Real Estate come down. Rents are also falling. Even in Belgium Supply is larger than Demand and more and more properties are offered as a rental because they simply cannot be sold.  Demand has fallen as all who could afford have acquired a property. The price of apartments along the North Sea coast have 'officially' come down by 20% .

Posted November 11, 2008

Professionals start to admit that sales of Real Estate in Belgium is slowing down and that we have entered a buyers' market. Prices are down at least 10% to 15%.

Posted October 22, 2008

Even in case we don't fall into a depression, we remain extremely negative for Real Estate. If you think about Real Estate as a healthy investment, you at the same time have to define the meaning of a 'good renter'. Today even a Bank and/or Insurance company have become dubious renters. What about Joe-6-pack?

Posted October 8, 2008

According to Real Estate group Trevi, the price of Belgian Real Estate has fallen by 15% since January 2008.

Housing or a roof over your head costs money, weather one has the funds available or not. By buying or building a home and paying hard cash for it one forsakes to the compiled potential interest income over the lifetime of the property.

Depending upon the quality and location, renting a house valued at €300,000 yields from €800 to €1,200; half the financial cost of buying it. The renter doesn’t has financial restraints, doesn’t pay any taxes on the property and all maintenance expenses are paid by the landlord.

As most Belgian's are Real Estate lovers and owners, the topic is extremely sensitive. For many real estate owners, it is already difficult to accept a Home  wears out and gets technically old: isolation standards, heating, bathrooms, kitchens,...  Nobody wants to see his main assets and in many cases his ‘life savings’ erode. But they always do.

Today, buying a medium sized house for € 300.000 with a fixed 20 year mortgage, costs € 2,000 per month + taxes and maintenance costs.

In 20 years from now, the total cost of the property will be € 480,000. Assuming it is still worth the initial € 300,000, the financial cost is € 180,000. This doesn’t include taxes and maintenance expenses. If however, prices stay stable or come down like we anticipate, monthly losses can run up to € 1,687 + Taxes and maintenance expenses. Real Estate is together with the Automobile 'the taxation' item by excellence: you simply cannot fold it up and take it out of reach of the tax man.

For the table below, the Total cost was calculated based on a fixed 20 year mortgage.

What happened from 1990 to 1993 in Japan is now happening in other countries in sequence!

Over the past years, each and every Belgian who could afford it and even those who could not, either bought a home or built one.  Goldilocks has for years been holding the hands of Belgian Real Estate and not a living soul that believes trees don’t grow all the way into heaven. Belgium is , like Manhattan, London city, California and Florida were, a NOT special situation. 

By today, Americans and Brits have already experienced that Real Estate was nothing more than a dream which was fantasized by Greenspan and his buddies. Many Americans were sure the (potential) rental income would at least cover the mortgage expenses and the Renter would pay for his investment. Bankers were over happy to confirm this incorrect idea as each new Mortgage meant an extra income. Reality shows it is not!

History shows over and over again that even inflation has been unable to keep up the real value of a Home. As inflation increases, the Taxation and the maintenance costs increase. To please their voters, Authorities have invented different mechanisms (ex. Indexation) to limit the increase of rental income. Even the inflation index is being cooked in such a way its impact on the rents is minimized.

Belgian birth rates have been coming down for years now. Still the Real Estate bubble kept on inflating against a background of growing supply and falling demand. What we have, is a perfect Von Mises example of misallocation of funds in Belgian style.

Goldonomic, Florida, USA - +1 (772)-905-2491