The Belgian has “a brick in his belly”. Who doesn’t know this adage? And it can be seen in the figures for the construction sector, which represents a little over 5% of the country’s 2019 GDP. This sector alone accounts for more than 17% of the total number of companies, 62% of which are in Flanders, 27% in Wallonia and 11% in the Brussels Region. There is a very high degree of granularity with a few large companies but above all a large number of SMEs and VSEs.
These companies employ 7% of private employment, of which 56% are manual workers, 16% employees and 28% self-employed. And there is a severe lack of manpower: some 5,000 jobs are to be filled permanently.
Some 50 billion jobs are carried out each year, with a significant share for the residential sector of 47%, 36% for non-residential and 17% for civil engineering.
Flanders takes the lion’s share with 80% of the construction volume. Wallonia and Brussels account for the remaining 18% and 2% respectively.
“When construction goes, everything goes. “This is easy to understand in view of the importance of the sector for the country’s economy.
Belgium is one of the few countries where the proportion of owners is almost 70% and 30% of tenants. The opposite is true in most of our neighbouring countries. It remains deep in our genes the idea that brick is a safe investment. The weakness of our pensions and the absence of a generalised second pillar system have certainly favoured this acquisition behaviour.
This trend is not immutable. It must be said that, today, access to home ownership for a first-time buyer is becoming more complicated in view of the equity capital that he must bring to make his purchase. The days of easy home loans for more than 100% of the purchase budget are well and truly over. At the instigation of the NBB, the banks require an own effort of at least 20% of the purchase price, with a verified repayment capacity. For an average purchase, this represents a really large investment that many cannot make without external help.
Buying also means “settling down” in a fixed place, almost immutable given the high property taxes on the purchase of a new property (VAT 21%) or on the second market (registration fees often 10 to 12%). Despite the conditional portability of registration fees (only in Flanders today), our tax system is a brake on all those who seek to maintain mobility in terms of work and family composition.
Investors who are looking with great interest at this residential market are therefore coming in. These investors are of a very different nature. They include listed companies such as Home Invest, but also many more discreet investors who hold a few million in residential real estate. There is also the individual investor who invests in one or two properties to improve their monthly income. Alongside pure residential, there is also a derivative which is the student kot where players like Xior and Quares are active. Less risky than other real estate assets, the residential gives lower returns that follow inflation and can give real capital gains over the long term. Candidates who cannot buy become good tenants.
Here too, under the impetus of regulators, banks are careful not to increase their sectoral exposure to real estate beyond certain thresholds. These developments are likely to impact construction and real estate. These are a few considerations on a major sector of our country’s economic life that affects everyone in one way or another in their daily lives, whether they are owners, tenants, co-workers, investors, developers, agents, … We will be back soon with a new episode on the risks linked to this activity which should not be underestimated.