2023-09-07 12:00:00
After two years of euphoria, where everything was bought – overpriced – and everything was sold – totally overvalued -, the real estate market has regained more rigor and stability. But more calm too.
In 2022, in Belgium, there have already been, on average, 2% fewer transactions than in 2021. This year 2023, the shock is more severe with 10 to 20% fewer transactions depending on the month compared to to 2022. For many professions that live off this real estate market via commissions or fees – agents, notaries, specialist lawyers, promoters and developers, property dealers, architects, kitchen designers, heating engineers and large-scale sanitary installers -, c is the cold shower. Especially since after the decline in sales of existing properties, we expect a drop in new supply.
Widespread omerta
“The atmosphere is gloomy. In May or June, we already had the impression of being on vacation”, agrees a Brussels real estate agent who, like many interlocutors, prefers to remain anonymous. “The day after a party, waking up after a drunk,” smiles one of his counterparts. “We can say that the agencies have lost 20 to 30% of their business this year!”, he is indignant, knowing that not all transactions go through an intermediary.
Both recognize that we are returning to pre-Covid activity and that after a period of “craziness”, a little “regulation” is “not harmful”. It prevents. “The rectification risks going well beyond, adds the broker. Because to the decline in transactions is added a reduction in the value of the goods.
A double penalty, therefore, which already obliges certain intermediaries to lay off their staff. This applies to notarial offices and promoters (see elsewhere), as well as to real estate agencies. “They thank as many employees as they hired in 2020, 2021 and 2022 to meet demand,” adds the real estate agent. “When it is not a question of the pure and simple disappearance of agencies which were created during this period”, adds his counterpart.
A period to be compared with that of the years 2007 (pre-crisis), 2008 and 2009 (economic and financial crisis)? “There are great similarities: the market is calming down, values are falling, bad agencies are closing, some employees are leaving…, agrees the agent. But there is a major change: easy money is no longer, at the very least money is more difficult to access as mortgage interest rates and equity requirements have increased. Real estate is no longer open to everyone.”
“To which are added the increase in the price of materials, the complexity of administrative hassles (PEB, money laundering, etc.), resumes her colleague, who nevertheless poses a more optimistic look, refusing the expression “real estate agent blues “. “Agencies and agents are used to ‘up and down’, the troughs of the wave. Real estate is cyclical, they know it. And they also know that this or that month, some sell better than them. Or less well… This goes for two agencies, but also for two agents in the same agency.”
From a seller’s market to a buyer’s market
“Let’s recognize that everyone has benefited from the two years of madness: sellers, intermediaries, banks, but also consumers who have benefited from extremely low rates. Today, everyone is disillusioned, first and foremost sellers who have struggling to integrate the fact that they missed the euphoria, that the market is less buoyant…” continues the broker. According to him, it is for those who have money that the end of the year will roll out the red carpet since they will be able to shop in a low market.
“The word bankruptcy is not on the agenda”
In 2021 and 2022, the promoters managed to sell the majority of the projects they had in their portfolio. Some very well, others less so, when it came to recapitalizing quickly. This has not prevented the bad news from piling up: economic gloom; inflation boom; increase in construction costs by 20 to 25%; automatic wage indexation; increase in land prices; decrease in their margin; violent rise in mortgage interest rates from less than 1 to more than 4% playing on the financial capacities of their customers but also on the financing and refinancing of their bank debts. All against a backdrop of delays in obtaining permits.
To the point of encouraging them not to embark on new projects. “They are pursuing current projects, even if some are in their second or third version, notes a market observer. But the others, they do not take them out of the boxes. Worse, they encourage their counterparts to even adding that there is no point in returning a permit before the October 2024 elections because it would be refused from the outset.
On the side of the Upsi, the Professional Union of the real estate sector, we do not go so far, without denying or even minimizing the bad fortune of its members. “This conjunction of elements – sluggishness, inflation, indexation… – impacts the end consumers who are their customers, indicates Olivier Carrette, CEO of Upsi. Investors are waiting, occupants cooled.”
Review goals
The developers most affected are those who have acquired expensive positions, forced to “sell the project, phase it, put it on hold or join forces to release it, continues the expert. Which only further diminishes the offer, forcing them to limit their fixed costs.” And especially staff costs.
But how far will this scarcity of supply, which stabilizes prices, go? The land has indeed taken enormous value and has undoubtedly reached a peak. As long as rates were low and land values were rising, delays in obtaining permits were manageable, with developers refinancing short-term at low prices. To the point of encouraging them, now that the rates are rising, to be less creative, less daring in their offer, what do some professionals suggest? “Certainly not, concludes Olivier Carrette. Competition between developers remains very tough and it is not by trivializing the offer that they will emerge.” Not without indicating that the crisis – of morale or real estate – is temporary. “The resilience of our sector is historic and will remain so. The word bankruptcy is absolutely not on the agenda.”
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