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The beginning of a new year is the ideal time to look forward to the future. In this blog post, we will highlight the residential investment market. An exciting and prosperous market that grows in popularity.
Before sharing our findings and experience, we will briefly define the market. Alongside the professional real estate segments (industrial, office and retail), our investors are increasingly diversifying their search towards residential investment properties. Historically low interest rates and a sufficient offer on the market are stimulating their appetite to invest.
With residential investment opportunities starting as from +/- 350.000 €, the threshold to enter this market is considerably low.
Unlike the segments of commercial real estate (Industry, Retail and Offices), residential investments offers steady yields at +/- 3 to 7% ; as the residential market inspire confidence due to its lower risk.
What about the private tenant? Regarded as a consumer, he falls within the scope of the Rental Housing law. The consumer enjoys protection and the landlord must maintain the lease duration and the notice period prescribed by this legislation. The key to success is asking for rental prices in line with market prices. This ensures a decent tenant demand, which will increase your chances of finding a good candidate who pays properly and ends up renting for a long period of time.
In addition to the quality of the tenant, you should also focus on the essentials of a good lease contract. Do not forget the ‘state of entry’ of your property. The law authorises the inventory check to be carried out at any time during the first month of the rental contract, but we advise you to organise the inventory check before your tenant moves into its new accommodation.
Another key point is the registration of the lease contract. When the lease has been signed, the owner must register it, together with the incoming inventory check, within two months. In Brussels, the landlord determines the language in which the lease contract will be drafted.
It’s often said that the location is the most important criteria in an investment, and this has never been more true. The proximity of main amenities such as public transport, schools/nurseries and shops are dominant in determining value. Moreover, when investing in city centres, parking space is an undoubtable asset.
In addition to the location, other criteria must be taken into account when buying a residential investment property.
What about the quality of the building? In practice, investors prefer a building with a concrete structure to one with a wooden framework. If you purchase an old building that requires major renovations or some refreshments, do not neglect the impact of these costs in your budget.
Also remember to ask for planning information about your property at city hall. This information will tell you the number of identified housings and possible planning violations, which can influence the purchase price and thus your final investment.
What changes will impact real estate in 2020? Requirements for roof insulation, double glazing and smoke detectors will be stricter. The authorities will carry out inspections regarding the minimum standard of roof insulation. If you do not meet these requirements, you are facing several penalties as a landlord, which is enough to declare your property as not suitable for renting.
Since 1 January 2020, a new standard applies to all homes, making double glazing mandatory. All rented rooms (bedroom(s), living room, kitchen and bathroom(s)) must be equipped with double-glazed windows. The common entrance hall and the toilet, for example, are not covered by this obligation.
Until recently, leased properties had to be equipped with smoke detectors. However, houses and apartments rented as primary residences were exempt from this rule. This is no longer the case, even primary residences must from now on be equipped with at least one detector per floor.
Some changes have also been introduced to the new CoBAT legislation concerning the minimum bedroom sizes in new buildings; the first bedroom must be at least 14m² and the other bedrooms at least 12 m² (1). By extension, all new accommodation must have sufficient acoustic insulation.
We observe that next to classic leases, more and more alternatives are being considered. For example, shared apartments projects are on the rise. Moreover, despite the recent reinforcement of the legislation on short-term rentals as proposed by the Air-BNB platform, we note that this option is still very popular in city centres. In the coming years, an increasing number of people will be living in a small space. According to the latest figures of the ‘rental prices monitoring centre’ (observatoire des loyers/observatiecentrum van de huurprijzen), we know that 'cohousing' projects have risen from only 5% in 2012 to 11% in 2018. As a consequence, architects and developers will be faced with an increasing challenge on sustainability, quality and originality of the buildings.
What about the regulations regarding a residential investment ? The National Bank of Belgium warns against the overvaluation of Belgian real estate compared to neighbouring countries. Banks have already increased their liquidity buffers twice to reduce their own risks. However, we are still witnessing positive and healthy growth in 2018 (+3.3%) and 2019 (+3.6%) (2).
Another change impacts the minimum amount of your down payment, namely a percentage of your property’s purchase price that you pay upfront. Usually, the bank agrees to loan money up to 80% of the value of the property. As a result, the investor will need more equity capital, which will considerably reduce, according to us, competition in larger investment opportunities.
In addition, we are seeing growth in the purchase of company shares holding the real estate (share deal), instead of buying the property itself (asset deal). The main motivation to choose this type of transaction is mostly to reduce additional taxes. In case you are considering this option, our Invest team has the expertise to guide you through this process.
Within our team, each consultant has his or her own speciality. Our investment portfolio can be subdivided into various segments: Industrial, Retail, Office and residential investment properties. Thanks to our dynamic way of working and synergy, we are able to assist our network of investors in an efficient and conscientious manner. The combination of quality, market knowledge and a strong local network makes Structura.biz one of the most active national real estate companies on the Belgian investment market.
When it comes to investment properties, Structura.biz focuses on Brussels and its periphery; but also on other major cities such as Antwerp, Ghent or Namur.
Are you looking for a residential investment property or do you want to sell your building? Contact us via email (office@structura.biz) or via phone (02/462.32.00). We would be delighted to help you.
(2) Expertise news, « ING Verwacht minder actieve vastgoedmarkt”, Expertise, 11/02/2020