Belgian real estate sector not immune to corona but there are bright spots
Covid-19 has hit the Belgian real estate sector unusually hard in
recent months. The blow was all the more severe because construction
and real estate activities have performed very well in recent years.
The shock was initially related to supply problems, in particular
temporary closures, staff shortages, social distancing and supply
chain problems. For households, covid-19 has also caused an income
shock, rising unemployment and increased uncertainty. Therefore,
weaker demand for real estate will gradually take over from previous
physical supply constraints as a factor limiting activity in the
real estate sector. Nevertheless, we should not be too negative for
the sector. Indeed, there are also bright spots, including the still
very low interest rates, the expected catch-up demand for smaller
construction works and the resumption of government investment in
The Belgian real estate sector has been in very good shape over the past two decades. This was reflected both in ‘construction’ (NACE Section F) and in ‘real estate activities’ (NACE Section L). In addition to house building, the first subsector includes commercial construction (e.g. industrial and office building) and civil construction (e.g. roads and bridges). The second comprises a broad range of real estate services, including the sale, rental and management of real estate. Over the period 2000-2018, real annual growth in the two real estate sectors averaged 2.5% and 2.8% respectively. That is more than the average 1.7% growth for the entire economy during that period. In recent years, the relatively strong growth of both real estate sectors has continued.
Covid-19 has also disrupted the operation of companies in the real estate sector on an unprecedented scale. From the successive surveys conducted by the Economic Risk Management Group (ERMG), it follows that the loss in companies’ turnover in both the construction sector and real estate activities has been large in the first phase of the pandemic in comparison to the total economy (figure 1). A substantial part of real estate activities was hit directly, as they were cancelled or suspended due to the closures imposed by the government. For example, real estate offices as non-essential companies had to keep their doors closed. Since mid-May, companies in the sector are entitled to resume their activities.