Housing

10 April 2018

Real Estate Plans : how to become a more informed buyer

Buying a property is a business, as well as an emotional decision – you’re investing in a home, not just bricks and mortar. So what should you pay attention to when buying property in Belgium? Here are some things to keep in mind.

Put your dreams into context
"Compared to the rest of the world, real estate in Belgium is quite cheap."
Dave Deruytter (ING)

When on the lookout for Belgian real estate, things start with your status as an expat. There are many things to consider when buying a house, such as your tax status as a resident or non-resident, or the fact that the real estate fiscal framework in Brussels differs from the one in Flanders and Wallonia. As well as screening properties, you’ll need to assess your personal financial situation and work through the obligatory red tape.


Historically, the Belgian property market is pretty stable. Belgian real estate never reached bubble status, and prices have been typically less volatile than in other countries. Compared to the rest of the world, real estate in Belgium is also quite cheap, with the capital region of Brussels being the most expensive in the country.

Mortgage
"It is typical in Belgium to repay a mortgage by means of continual monthly payments."
Dave Deruytter (ING)

Most Belgian banks will be willing to finance your purchase in Belgium, subject to your finances and credit history. But banks will also protect you as a customer, meaning they will not lend more than you are able to repay with one third of your regular monthly income.

The bank will always check your personal situation and assess your assets and debts. As a general rule, you need enough of your own savings to pay taxes, notary and mortgage costs, as well as the %-gap. Purchase costs and taxes alone amount to about 15% of the net purchase price.

The bank will offer you financial advice and credit solutions to meet your individual needs and situation. 

Insurance

As a customer, you will be encourage to take out debt balance insurance. You can use the corresponding insurance premium for income tax optimization. When used for tax optimization, the age limit is 65 years and the minimum term of the loan is ten years.  Banks will also want you to protect your and their financial investment, and will expect you to insure the property against fire. 

Offer and sale
"Belgium does not operate a system of free offers that can be withdrawn at any time. Here an offer is binding if accepted by the selling party."
Alexis Lemmerling (notary)

When you find the property of your dreams, you may be encouraged by the owner or estate agent to make a prompt offer. Be aware that Belgium does not operate a system of free offers that can be withdrawn at any time. Here, an offer is binding if accepted by the selling party. So, as a potential buyer, be careful how much you offer and when you offer. Avoid any loose ends. Your estate agent or notary can walk you through the offer process.

When buying or selling real estate, you will always have to pass through the office of a notary. A real estate expert and real estate company are typical but not mandatory parties.

"In order to avoid nasty surprises, you can invite an expert to check the real estate before you commit yourself."
Kristien Vivaene (real estate expert)

The notary screens the real estate and rights of the selling party from the legal point of view. The notary also draws up both the sales deed between seller and buyer and the mortgage deed between the borrower, and the mortgagee or bank. Both deeds are usually drawn up on the same occasion.

Also in Belgium, a property by default is sold in the condition it’s seen. Thus, your offer should not only specify the sale price but also all other conditions and terms of the purchase. Make sure you have all necessary information to avoid any uncertainty. Maybe you can invite an expert to check the real estate before you commit. Paying for a survey now can help you avoid a costly mistake. The notary and real estate agent can also inform you about particular real estate constraints.

Taxation

Real estate ownership in Belgium is mainly taxed at the moment of purchase. When selling after a few years, you will also need to obtain a very good capital gain before being taxed on that gain.

Taxation for existing property (droits d’enregistrement/ registratierechten) varies between 10% in Flanders (7% in some cases as from 1-6-2018 onwards) and 12.5% in Brussels and Wallonia. When you opt for a new building and are the first buyer ever, you will pay 21% VAT on the building. The land-part is always subjected to the real estate purchasing tax.


You might be eligible for tax reduction or abatements. This tax reduction encourages first time buyers. Again, regional schemes vary. In the Brussels capital region for example, the tax reduction can be as high as 21,875 €, at least when the price of the property doesn’t exceed 500.000 €, you remain owner of the property for 5 years and you have no other real estate in full ownership worldwide. This also means that if you sell the property within 5 years, you will have to pay back the advantage in full.

While taxation at the time of purchase of real estate is relatively high compared to other countries, taxation on the income of the property is not. Real estate taxation again varies with the region, province and commune. The typical basis for real estate tax calculations is the fiscal yearly rent value or KI (Kadastraal Inkomen/Revenu Cadastral).

  • When it concerns your own home where you actually live, the withholding tax should be the only taxation.
  • When sub-letting your home to a private person, the taxable base is the indexed KI times 1,4.
  • When you rent out your property for professional or commercial use, the taxable base is the real rent income minus 40% on a ‘professional’ part of the rent.

Don’t forget that as a resident in Flanders or Wallonia and local invested mortgager, you might be eligible for tax reduction (not in Brussels) up to a certain part of the borrowed amount taken out to finance the property you live in (and to a lesser extent for a buy-to-let property). The part eligible for tax reduction typically varies between 50,000 and 100,000 €. This part of credit needs to be guaranteed by a mortgage and have a tenor of at least 10 years.

The tax reduction also applies for a non-resident, as long as you can document enough taxable income in Belgium. In the Brussels Capital Region there exists no such mortgage related reductions. Brussels compensates this possible regional fiscal disadvantage under certain conditions by important reductions on the real estate purchase tax (see example above).

More top tips

  1. When assessing real estate, always keep in mind your needs, wants, and nice-to-haves. Decide in advance what you’re willing to compromise on.

  2. Compare prices. A notary can tell you what’s happening to house prices in your chosen area. Some property websites also offer price comparison tools.

  3. When selecting areas in Brussels, consider ‘new’ areas like Forest, Jette, Koekelberg, Anderlecht, Schaerbeek and specific new development areas.

  4. Why not consider shared housing. You might get extra value and facilities for your money.

  5. Visit the property at different times of the day – during the rush hour, for example.

  6. Buyer and seller can use their own notary without extra cost to the total notary fees of the transaction. For that reason, it is highly recommended to bring in your own notary.

  7. Shopping around for the cheapest notary will not help. Notary’s fees are set by law and are therefore non-negotiable. Notary fees are also subject to VAT. 

  8. When accepting foreign money, banks will want to check the origins of that money and see proper documentation.

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