Belgium, France, Netherlands

With Real Estate Bubbles deflating in the USA, the UK, Spain, and most other countries worldwide, it is now 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, the price of Belgian real estate has increased, expressed in Euros, but has lost 75%, expressed in real money.

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 Gain 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 as generation passes away and Inheritance taxes need to be paid on the overvalued properties; as a result, we shall see more and more forced sales.
• The growing unemployment and job insecurity.
• Lower Real Spendable income and 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.

The origin of any real estate bubble is fractional reserve banking, the creation of fiat money out of thin air, and the misallocation of these funds.  Misallocation we have as soon as demand increases does not regulate supply but instead by self-feeding speculation. Because of an artificial excess of funds and artificially low interest rates, incorrect signals are sent to the market: builders continue to build in a market without a shortage of homes, and people continue to buy 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) up to the point where the demand stalls. Demand stalls because real estate prices have become so expensive that even at historically low mortgage rates, they have become unaffordable: the market dries out. As the recession worsens, taxation increases, more people lose their income, real spendable income drops (because of inflation), and the consumer spending pattern changes.

The marginal trades determine the price of the street. As sellers lower their asking price to meet demand, the price of Real Estate continues to slide. The bubble busts, and the price decreases, 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 for Real Estate.
• Belgian Real Estate is extremely expensive compared to other countries and 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 Gain 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 as there is NO 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 a lot longer for Real Estate to correct the incurred 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 stand at an average of 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 isolation 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.

• Not only are Real Estate prices coming down, but rents are also falling. Even in Belgium, Supply is larger than Demand, and more and more properties are offered as rentals because they simply cannot be sold. Demand has fallen as all who could afford it have acquired a property. The price of apartments along the North Sea coast has 'officially' come down 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 think about Real Estate as a healthy investment, you also have to define the meaning of a 'good renter.' Today, even a Bank and/or Insurance company has become dubious renters. What about Joe-6-pack?
• As the financials deleverage, they will also have to 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 this 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. Buying or building a home and paying hard cash, one forsakes the compiled potential interest income over the property's lifetime.

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 have financial restraints, doesn’t pay any taxes on the property, and the landlord pays 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: isolation standards, heating, bathrooms, kitchens, etc.  Nobody wants to see his main assets and, in many cases, his ‘life savings’ erode. But they always do.

Belgian Real Estate is in a similar position as US Real Estate was a couple of years ago, just before ‘the bubble’ busted.

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 were using every arrow they had left to get any possible property sold: 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 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 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 by excellence: you simply cannot fold it up and take it out of reach of the taxman.

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

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 the real value of a home. As inflation increases, Taxation and maintenance costs increase. To please their voters, Authorities have invented different mechanisms (e.g., Indexation) to 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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