Hypostat 2015

EU 28 Country Reports
Belgium
By Frans Meel, Union Professionnelle du Crédit
Macroeconomic Overview
According to the annual report of the National Bank of Belgium, economic developments
in the country were in line with euro area peers during 2014. After two years of
virtual stagnation, Belgium’s GDP – like that of the euro area – showed clear positive
signs, albeit modest. In nominal terms, GDP was up by 1.1% on average over the
year, compared with very slight increases of 0.1% and 0.3% respectively in the previous
two years. Quarter-on-quarter growth remained positive, but the rate of growth
dropped by almost half, to 0.2% on average, compared with the first quarter of 2014.
In Belgium, economic uncertainty does not seem to have made a dent in domestic
demand, which declined but outstripped production. The lacklustre performance
on the supply side is attributable mainly to the relatively modest growth in exports.
Economic activity in the construction industry – which has seen its total value
added gradually edge up in the past few years to reach nearly 6% in 2014 – was
boosted in the first quarter by an exceptionally mild winter. Partly because of this
unusually robust result, it subsequently fell. Quarterly value added growth remained
weak or negative, as had been the case in the two previous years.
In 2014, the modest upturn in employment was not enough to absorb the growth
of the labour force, and joblessness rose further. As a consequence, the unemployment
rate reached 8.5%, a level not seen since 1999.
In 2014, inflation measured by the year-on-year change in the harmonised index
of consumer prices (HICP) declined for the third year running, averaging 0.5%,
compared with 1.2% in 2013 and even dipping to – 0.4% in December. The negative
trend for inflation, which started in the closing months of 2011 due mainly to
the fall of energy prices, has been exacerbated by declining food prices. As the
headline inflation was driven down by volatile factors as energy and food prices,
the underlying inflation, i.e. the more lasting inflation rate, by contrast, went up
a little on the back of higher services prices.
In 2014, private consumption grew steadily, if moderately. Average consumption
growth in the year worked out at 1%. Once again, consumption trends proved
less volatile than GDP, and by the end of 2014 it was already 6% higher than
before the crisis, vis-a-vis a GDP increase of only 2%.
After a two-year drop in 2012 and 2013, investment in housing inched up in 2014.
Nevertheless, volumes still languished around 10% below those recorded before
the recession. In addition to higher disposable incomes, this tentative revival also
draws on less fear of unemployment, while exceptionally low mortgage rates
exerted an influence as well. Other factors were the changes in the law and tax
rules related to the tax treatment of mortgage loans.
Housing and Mortgage Markets
The property market in Belgium did not undergo any severe adjustment in the
wake of the financial crisis. In fact, from a long-term perspective, house prices,
over the last fifteen years, have generally followed a pattern in line with most
other European countries, though the evolution has been smoother. Even at the
height of the financial crisis, the fall in house prices was modest and short-lived.
In 2014, the average prices of classic-type houses, villas, apartments and building
lots continued to rise slightly. This price increase was more moderate than the
year before, for classic-type houses, apartments and building lots. As for villas, the
increase was more or less the same. In 2014, average house prices went up 2.1%.
Villa prices stabilized in 2014. In 2014, the average purchase price for a villa
amounted to EUR 333,736, compared to EUR 331,652 in 2013, i.e. a 0.63% increase.
The average price for apartments has been going up since 2010 and has now
reached approximately EUR 209,516 EUR, compared to EUR 207,926 in 2013,
i.e. a 0.76% increase.
The outstanding amount of residential mortgage lending reached approximately
EUR 197 billion at the end of 2014 (against EUR 189.5 billion at the end of 2013).
In 2014, more than 231,000 mortgage credit contracts were concluded amounting
to more than EUR 25.5 billion (refinancing transactions not included). The
number of mortgage credits granted rose by 11.4%, and at the same time the
average amount went up by 14.9%. In 2014, the Belgian mortgage credit market
expanded, reaching the highest level on record, mainly as a result of an exceptionally
strong fourth quarter.
The number of credits for the purpose of purchasing went up by 11%. The number
of construction credits rose by more than 15%. The number of credits granted
for other purposes (piece of land, garage,…) increased by more than 22%.
Finally, there was an increase of more or less 8% in renovation credits in 2014,
compared to the 2013 figure.
Especially in the course of the fourth quarter, lending showed a massive increase: the
number of credits granted amounted to almost 89,000, amounting to approximately
10 EUR billion. This strong increase in lending, which was building up during the
second half of the year, can be explained by the combined effect of the reduction
in fiscal incentives (home bonus) in Flanders to be phased in in 2015, the amendment
of the home bonus provision in the other regions and the low interest rates.
In the fourth quarter, the increase in credits for all purposes grew remarkably
year-on-year: the number of credits for the purpose of purchasing rose by 48.4%,
construction credits went up by 72%, credits for other purposes showed an
increase of 112% and renovation credits went up by 88%.
The level of indebtedness of Belgian private persons remains low, as compared
to that in other European countries, and for years, it has been about 1.2% of the
number of credits outstanding.
The average amount of mortgage loans for “purchase” stood at almost EUR142,000
at the end of 2014, about EUR 4,500 (or almost 5,5%) more than at the end of
2013 (EUR 134,400). The average amount of mortgage loans for renovation
purposes remained at ± EUR 41,000.
In 2014, the market share of new fixed interest rate loans and loans with an initial
fixed rate of more than ten years represented about 78% of the total new loans.
The share of new loans granted with an initial fixed rate of 1 year, decreased to
approximately 3.5%. The number of credits with an initial period of variable interest
rate between 3 and 5 years also showed an increase (18.5% of the credits provided).
Market prospects
In the first quarter of 2015, the number of mortgage credit contracts amounted
to 46,500, amounting to more than EUR 4.5 billion, external refinancing transactions
not included. This means an increase in the number of credits granted by
more or less 9.5% throughout the first quarter, compared to last year’s figure.
The corresponding amount however is still 2.3% lower.
Regarding credit purposes, the situation compared to that of 2014 shows a decrease
in the number of credit contracts for house purchase (-11.4%) and construction
(-14.8%), whereas the number of house renovation credits (+48.4%) and credits
for buying and renovating a house (+13%) went up considerably.
The decrease in the number of credits granted for the purposes of purchasing and
building a house, mainly occurred during the first two months of the year, and this
confirms the expected result of the urge felt by many borrowers to sign a credit
contract before the end of the year so as to be sure of taking advantage from the
higher home bonus level, at that time, in Flanders. All through the first quarter,
the increase in the number of renovation credits was remarkable.
26 | 2015 EMF HYPOSTAT