Energy crisis pushes prices of energy-efficient housing
One of the defining factors of 2022 was the energy crisis, during which energy prices reached their highest level ever. The energy efficiency of homes in Belgium suddenly came under scrutiny. The current situation is difficult to describe as encouraging. According to our estimates, an average house in Belgium consumes 365 kWh/sqm/year (EPC D), and an apartment consumes 176 kWh/sqm/year (EPC B). The European Commission has set the goal that all buildings in Europe should be climate-neutral by 2050. In Belgium, these goals were interpreted differently by each region, but we can approximate that all buildings should have an A label (< 100 kWh/sqm/year) by 2050. According to our latest figures, currently only 3% of houses and 11% of apartments would meet that criterion. Almost one-third of houses are currently even in a category beyond, consuming more than 500 kWh/sqm/year. So, there's a lot of work to be done. This dire situation also had an impact on the real estate market in 2022.
Energy efficiency at the top
In both Flanders and Wallonia1, the interest in the most energy-efficient homes proved to be greater than the previous year: the prices of the most energy-efficient houses and apartments started to rise faster in 2022. In Flanders, those looking to buy a house with an A or B label had to pay more for the first time than for a house with a C label2. Compared to a reference house with a D label, you paid 9% more for the most energy-efficient houses. The same story applied in Wallonia, although the price differences were slightly wider there: since this year, an energy-efficient house costs 15% more than the reference house. Apartments didn't escape the trend either. For apartments, which are generally more energy-efficient than houses, the price difference between apartments with B and A labels was further magnified in 2022, both in Flanders and Wallonia.
Another notable trend is that energy-guzzling homes haven't become less attractive (read: cheaper). They do, of course, represent the most affordable segment in the market. In Flanders, you paid 11% less for a house with an F label in 2022, and in Wallonia, the difference was 15%, compared to an identical house with a D label. But, especially when compared to the category just above, we see that the lowest-performing homes have increased in price just as quickly or even faster since 2020.
Outlook for 2023: Bouwshift and incentives
Contrary to conventional beliefs, we anticipate that, at least for Flanders, prices for highly energy-consuming houses will not decrease and might even rise. Due to the building shift, building plots are becoming scarcer and therefore more expensive. A more economical alternative presents itself in the form of energy-guzzling houses. As described earlier, these still belong to the most affordable segment of the market. But more importantly, both the Belgian government and regional governments offer financial incentives to purchase and demolish such houses. The Belgian government extended the reduced VAT rate of 6% for demolition and reconstruction of homes throughout the Belgian territory until 2023. Similar to renovation incentives in Flanders, such measures increase borrowing capacity, which in turn drives prices up again. Crucial here is that this trend can only unfold for the lowest-performing houses. Houses that don't perform well in terms of energy but still fall within 'acceptable' limits won't be able to benefit from these advantages and will most likely experience price declines.
1Because each region in Belgium determines how the energy performance score is calculated and defined, we always study Flanders and Wallonia separately. For the Brussels-Capital Region, there's insufficient data available to draw reliable conclusions about the impact of the energy score over time.
2For the sake of convenience, we use the labels as set forth by the Flemish Government.
Read more from the annual report 2022