Belgium, France, Netherlands

Real estate bubbles are deflating in the USA, the UK, Spain, and most other countries worldwide, and they are also happening in Belgium, the Netherlands, and France.

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Real Estate is Real Estate, and the cost/price increased after World War II. However, we have seen the top for many countries (USA, Spain, Ireland, etc.), and the BUBBLE is deflating. Other countries are lagging and have reached their top in 2015/16 (for example, Belgium and the Netherlands). In the long run, GOLD performs A LOT BETTER than Real Estate and demands LESS ATTENTION and NO Tender Love and Care.

News as of March 2020	This is the Buy Climax (July 2021)
Since 2004, Belgian real estate prices have increased in euros but have lost 75% in real terms.

Since January 2012, we have CLEAR signs that France and Belgium's real estate market bubbles have been drying up and deflating.

Examples of forces that will push Real Estate prices down:

• Existing or new capital gains tax.
• Second residence tax.
• Existing or new Wealth tax.
• Rising interest rates: The higher the interest rates, the more expensive a mortgage and monthly payments are.
• The reluctance of Banks to grant Mortgages.
• Selling pressure will increase as generations pass away and Inheritance taxes must be paid on overvalued properties; as a result, we will see more and more forced sales.
• The growing unemployment and job insecurity.
• Lower Real Spendable income and a disappearing middle class.
• The complex and more stringent legal rules: isolation, heating norms,...
• The higher maintenance costs and the legal inability to adjust rental income.
• Immigration will become harder, and many will return to their home countries (ex., Turkey, where the economy is improving).
• The bubble and prices are at a level unseen since 1740.
  

Posted September 10, 2010

It is not easy to explain WHY the Belgian Real Estate bubble will burst, and for the (potential) real estate owner, it is extremely hard to understand WHY the price of Belgian real estate can and will fall by at least 60%.

The Belgian real estate cycle is lagging behind the American cycle by about 2 to 3 years because of the social and local taxation systems.

Real estate bubbles originate is fractional reserve banking, the creation of fiat money out of thin air, and the misallocation of those funds.  Misallocation occurs as soon as demand increases, as it does not regulate supply but instead feeds on self-feeding speculation. Because of an artificial excess of funds and artificially low interest rates, the market receives incorrect signals: builders keep building in a market without a shortage of homes, and people keep buying real estate because they think prices will continue to rise. (Would you buy a house if you knew you could buy it at a price that is 25% lower next year?) The action becomes self-feeding, like any bubble (the Mississippi scheme, the Tulip Mania, the Dot-com bubble), until demand stalls. Demand stalls because real estate prices have become so expensive that, even at historically low mortgage rates, they become unaffordable: the market dries up. As the recession worsens, taxation increases, more people lose income, real spendable income drops (because of inflation), and consumer spending patterns change.

Marginal trades determine the price on the street. As sellers lower their asking prices to meet demand, real estate prices continue to slide. The bubble bursts, and prices fall, which becomes self-feeding.

Note: a mortgage is a consumption credit only and does not self-destruct. Hence, it is not a vital part of an economic boom.

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 Belgians did not have a bubble. There is and was no such thing as a microclimate in real estate.
• Belgian real estate is extremely expensive compared to other countries, and it is also 'old'. Just check the examples below.
• Belgian real estate is a HOCG (high-order capital goods), and its real value will fall due to the recession/depression in the coming five years. During the recession, maintenance expenses and taxes rise, and (Potential) Rental income falls in nominal terms. Belgian Authorities will soon impose a capital gains and Wealth tax.
• Belgian Real Estate will fall as long-term interest rates soar due to the (hyper)inflation. All Real Estate will.
• Belgian Real Estate is unable to keep up with inflation. It sits in a solid Downtrend, expressed in Real Money or Gold.
• Commercial Real Estate is the next shoe to drop. As the recession/depression worsens, more commercial properties are "for Sale" and/or "for Rent," but with is demand, they stay vacant.
• Equities can be corrected in months, while real estate takes years. Compared to Equities (which are also Real Assets), it takes much longer for Real Estate to recover the loss.
• Stocks are 'liquid' (contrary to Real Estate) if they 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, they still 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.

1 = 1 + 1 + $ 5,000

=  +  + $ 5,000

• Sell one 60-year-old worn-out 1,000 sq.ft./100 m² townhouse with no central heating, no AC, bad or no insulation for €150,000 or approx. $ 220,000

• Buy one historic renovated  Cottage (2,800 sq.ft./280 m² built – high ceilings – hardwood floors - historic building) for $110,000

• Buy one $ 100,000 lovely renovated family home (3,000 sq.ft./300 m² house – renovated, central heating, AC, lovely garden)

• and save $ 5,000/€ 3,250 cash.                                        Click here for more.

• Real Estate prices are coming down, and rents are also falling. Even in Belgium, supply is larger than demand, and more and more properties are being offered as rentals because they simply cannot be sold. Demand has fallen because everyone who could afford it has already bought a property. The price of apartments along the North Sea coast has 'officially' fallen by 20%.
• Professionals are starting to admit that Real Estate sales in Belgium are slowing down and that we have entered a buyers' market. Prices are down at least 10% to 15%.
• Even if we don't fall into a depression, we remain extremely negative about Real Estate. If you consider Real Estate a healthy investment, you also have to define the meaning of a 'good renter.' Today, even a bank and/or insurance company has become a dubious renter. What about Joe-6-pack?
• As the financials deleverage, they must also sell Real Estate assets. Who will buy them at what price, and where will they get the mortgage?

In the real estate sector, the market dries up at first. Next, there is a foreclosure on your neighbor's house...and that forced sale brings down the value of your own house.

Housing or a roof over your head costs money, whether one has the funds available. By buying or building a home and paying hard cash, you forgo potential interest income over the property's lifetime.

Depending on the quality and location, renting a house valued at €300,000 yields €800 to €1,200, half the cost of buying it. The renter has no financial restraints, pays no property taxes, and the landlord covers all maintenance expenses.

Most Belgians are Real Estate lovers and owners, so the topic is extremely sensitive. For many real estate owners, it is already difficult to accept a home that wears out and gets technically old: insulation standards, heating, bathrooms, kitchens, etc.  Nobody wants to see their main assets and, in many cases, their ‘life savings’ erode. But they always do.

Belgian Real Estate is in a similar position to US real estate a couple of years ago, just before ‘the bubble’ burst.

It is characterized by exactly the same disbelief seen in the US just before the pin touched the bubble. At that time, real estate brokers used every arrow they had left to sell any possible property: 30- and 40-year mortgages and flexible interest rates. Some builders even allowed a complimentary pool and automobile.

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, 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 prices stay stable or decrease as anticipated, monthly losses can run up to € 1,687 + Taxes and maintenance expenses. Real estate, together with automobiles, is 'the taxation' item par excellence: you simply cannot fold it up and take it out of reach of the taxman.

For the table below, I calculated the total cost based on a fixed 20-year mortgage.

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

Over the past years, every Belgian has been able to afford it, even those who could not buy a home or build one. Goldilocks has held the hands of Belgian real estate for years and is not a living soul who believes trees don’t grow into heaven. Belgium is NOT special like Manhattan, London City, California, and Florida.

Today, Americans and Brits have already experienced real estate as nothing more than a dream that Greenspan and his buddies fantasized about. 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 overly happy to confirm this incorrect idea, as each new mortgage meant extra income, but reality shows it does not!

History shows that even inflation has been unable to keep up with a home's real value. As inflation increases, Taxation and maintenance costs increase. Authorities have invented different mechanisms (e.g., Indexation) to please their voters and limit rental income increases. Even the inflation index is being cooked to minimize its impact on rent.

Belgian birth rates have been coming down for years now. Still, the real estate bubble kept inflating against a growing supply and falling demand. We have a perfect Von Mises example of misallocating funds in the Belgian style.

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