14 May 2020
Buying or selling houses during corona: frequently asked questions
Will the prices of flats and houses fall? Is it better to postpone buying or selling? Will mortgage lending change? Answers to the most frequently asked questions about property.
1. Will property in Belgium go down in price?
There is a direct link between growth in income (which is largely determined by economic growth) and increases in property prices. For 2020, ING is expecting a crimp in our economy of at least 6.8% (as of 11 May), even if governmental measures cushion negative impacts. That does not mean, however, that Belgian property will become 6.8% cheaper. ING foresees a decrease of ‘only’ 2 percent. There are various reasons for this:
- Property remains attractive as an investment because interest rates on loans are low. This is especially so if you compare it to the low interest received on high quality bonds. Due to increased anxiety and significant fluctuations on share markets, many Belgians continue to see property as a better option for investing their money.
- The collective savings reserve of Belgian households is currently at a record high. That means that, on average, there is enough money in the family bank account to purchase property.
- Belgians have traditionally been very optimistic about the evolution of property prices. An annual international survey conducted in 2019 by ING showed that 57% of Belgians thought that property prices would never fall, while only 30% of Germans shared this opinion. Belgians’ strong belief in the stability of the property market, coupled with their well-known ‘brick in the stomach’, means that a steep decline is less probable.
ING is expecting income growth to fall sharply in the first half of 2020 and for the economy to then recover. In that scenario, in which the recession does not last too long, Belgians’ confidence in the market will, in theory, not be undermined. If the economy shrinks by more than is currently projected (-6.8%), property prices will also drop.
2. Is it better to postpone buying or selling a house or flat?
That depends on your personal situation and choice. In general, however, there is little point in delaying plans to buy or sell when it concerns your family home. A family home is generally purchased for the long term (5 to 10 years). That period is usually long enough ride out any rough patches.
3. Will it be harder or easier to get a mortgage?
The crisis will have a negative impact on income growth for most Belgians, which will in turn affect average borrowing capacity. In most cases, the average Belgian will be able to borrow less when purchasing a home.
Conversely, credit terms (such as interest, loan lifetime and the ratio between your monthly earnings and monthly loan repayments) will not change significantly. The European Central Bank has already taken measures to keep interest rates in the eurozone low. Banks can borrow money cheaply from the European Central Bank. This ensures that banks will be able to keep mortgage interest levels relatively low.
We would like to highlight that credit terms, not including interest, may become somewhat stricter. However, this tightening would have taken place even without the coronavirus. At the start of 2020 we had already anticipated a tightening of credit terms by banks due to new rules adopted in January 2020.
4. What will happen with mortgage lending in cases where signing of the deed has been postponed?
If you have agreed a mortgage loan, the money is released only when the notarial deed is signed. Once the loan is agreed by you, the money should be withdrawn within four months. In these exceptional circumstances, banks have decided to extend the terms of credit by two months. Meaning that you now have six months to withdraw the money. This avoids you having to agree a new loan.
5. I bought a house and the deed has been signed. What will happen with my current loan if my earnings are now lower?
You can request a mortgage payment holiday. You will have to meet a number of conditions to qualify. These conditions include:
- a reduction or loss of income;
- no prior (as of 1 February 2020) mortgage arrears;
- the house is your only house and you must be domiciled mainly in Belgium;
- you have savings of less than 25,000 euros.
6. Will my deed of sale be executed in time?
Usually, yes because various arrangements have been put in place in order to bridge this period. A deed of sale is typically executed within four months after signing the contract before a notary. That term has been extended and is fixed at 6 months.
In May there will be a new arrangement so that notarial deeds can be signed without having to physically go to a notary: the digital authorisation. This authorisation allows you to name a trusted adviser or notarial professional who will sign the deed on your behalf. The notary will explain the deed via video teleconference, after which you can give your approval.
7. I bought a house before the lockdown, but I have yet to sell mine. What now?
If you have already bought another house, then there is a chance that you will not be able to sell your own house within the term that you had in mind. In that case, it may be desirable to - after consulting with the notary, the other party and the bank - postpone the execution of the sale contract (extensions can be up to six months after signing the contract). In addition, it is also possible to request a bridging loan. This is a loan to cover the period in which you have bought a new home but have not yet sold your old home. The interest that you pay on this kind of bridging loan is generally higher than the interest on a 'normal’ mortgage.
Problems may arise in an opposing situation. Specifically, if you sold a home before the corona crisis began but are unable to now find a new house on time. In such cases, it may also be desirable to delay the execution of the sale contract for a couple of months. Obviously, you need to do this in consultation with the other party and the bank.
8. When will home viewings be permitted again?
In theory, you can still view homes right now. But this might result in you purchasing the property sight unseen, or solely on the basis of photos or videos. That is highly inadvisable.
The date when in-person home viewings will be permitted again will depend on forthcoming governmental measures.