THE RESIDENTIAL INVESTMENT MARKET

The start of a new year is the perfect time to look ahead. In this blog post, we’ll shed some light on the landscape of the residential investment market. It’s a fascinating and thriving market that’s steadily growing in popularity.

Before sharing our findings and experience with you, we’ll briefly outline the specific market. In addition to the commercial real estate segments (Industrial, Offices, and Retail), we’re noticing that our investors are increasingly diversifying their search for residential investment properties. Historically low interest rates and a healthy supply of opportunities are fueling the hunger for more.

1. Purchase

Knowing that you can invest in a residential investment property starting from around €350,000 allows a responsible owner to work with us to find the right investment. Unlike commercial real estate, returns on a residential investment are typically between around 3% and 7%. These returns are often more stable due to the lower risk and the fact that residential real estate often feels more familiar.

2. Rental

What about private tenants? As consumers, they fall under the scope of the Housing Rental Act. Consumers are protected, and landlords/owners must observe the rental and notice periods prescribed by this legislation. The key to success in this situation is charging market-based rents. Just as with purchasing, charging a fair rent is crucial for a successful sale. It gives you more choice, increasing the chances of finding a good tenant who pays correctly and ultimately rents for a longer period.

3. Points of attention

Besides the quality of the tenant, a good lease agreement should also be considered. Don’t forget the inventory of fixtures and fittings, which must be drawn up before the property is rented out or within the first month of occupancy. Another crucial point is the registration of the lease. The registration obligation lies with the landlord and must be completed within two months of signing the lease. In Brussels, as the owner/landlord, you choose the language in which the lease is drawn up.

It’s a cliché, but location is and remains important when buying real estate. When purchasing a residential investment property, you should consider the availability of public transport, schools/daycare centers, and shops. In city centers, parking is a plus!

And what about the building’s quality? In practice, we see that investors prefer concrete structures over timber-frame buildings. If you buy an outdated building requiring renovations or structural repairs, don’t underestimate the impact this will have on your investment. Also, be sure to ask for the urban planning information for an investment property. This will include the number of approved apartments and any planning violations. These factors also influence the purchase price and your ultimate investment.

What will change for your property in 2020? In short, checks will be made for adequate roof insulation, double glazing, and smoke detectors. Regarding the minimum standard for roof insulation, the government will focus on inspections. If you don’t meet the standard, you risk penalty points as an owner/landlord, which is sufficient to declare the rented property uninhabitable.

The double glazing standard also came into effect on January 1, 2020. All rented spaces (bedroom, living room, kitchen, and bathroom) must be fitted with double glazing. This standard only applies to hallways and toilets.

Smoke detectors have been mandatory in rental properties for some time, but they are now also required in every family home. This standard stipulates one smoke detector per floor, but it’s true that this regulation serves more of an awareness-raising purpose.

The new CoBAT legislation also includes some changes. For example, each first bedroom in a new residential unit must be at least 14 m², and all other bedrooms must be at least 12 m²⁽¹⁾. When expanding, each new accommodation must have sufficient acoustic insulation.

4. Trends 

Besides traditional rentals, we’re seeing more and more alternatives being considered. For example, cohousing projects are popping up everywhere. Even with the recently tightened regulations regarding Airbnb, we’re seeing this rental model remain very popular in city centers. In the future, we’ll see more and more people living in smaller spaces. According to the latest figures from the rental price observatory, cohousing projects have risen from just 5% in 2012 to 11% in 2018. The challenge now lies with the creativity of architects and entrepreneurs who will focus on sustainability, quality, and originality.

What about the regulatory factors that play a role in the purchase of an investment? The National Bank of Belgium warns about the overvaluation of Belgian real estate compared to other neighboring countries. Additional capital buffers have already been imposed twice to limit the banks’ risk in the market. Despite everything, we still see positive and healthy growth in 2018 (+ 3.3%) and in 2019 (+ 3.6%)^(2). What has also changed are the minimum contributions from banks. In most cases, the bank lends a minimum contribution of 80% of the building’s value for residential investments. As a result, the investor will have to have more of his own resources, which will reduce competition for larger investments.

We’re also seeing an increase in purchases via share deals. For tax reasons, more and more owners are choosing to sell their real estate companies. This is also a very interesting option and worth considering. A share deal is quite technical, and Structura.biz can assist both the owner and the prospective buyer.

5. Team 

Within our Invest Team, each consultant has their own specialty. Our investment portfolio can be divided into the following segments: Industry, Retail, Offices, and Residential investment real estate. With a dynamic team and good cross-pollination, we succeed in quickly and accurately helping our network of private investors. The combination of quality, market knowledge, and a strong local network makes Structura.biz one of the fastest-growing national real estate companies.

Regarding residential investment properties, Structura.biz focuses on Brussels and the surrounding area, but we also invest in other central cities such as Antwerp, Ghent, and Namur.

If you’re looking for a residential investment or a buyer for your investment property, we’d love to hear from you. You can contact us at office@structura.biz or by calling 02/462.32.00

(1) https://www.dlm-law.com/blog/2019/4/19/actualits-en-droit-de-lurbanisme-en-rgion-de-bruxelles-capitale-cobat-et-rru
(2) Expertise news, « ING Expects Less Active Real Estate Market”, Expertise, 11/02/2020