Buy-to-let is not a one-way street in Brussels

Anyone who bought residential property in Brussels five or more years ago should be rubbing their hands with glee - they will have seen their investment almost double in market value. Prices are currently stable and look set to increase further, albeit slowly.

The surge in house prices has been attributed to several causes. The need to off-load undeclared Belgian francs during the switch to the euro, coupled with the Belgian state’s tax amnesty on black money re-entering the system, meant that property was a safe place for people to park their capital. The collapse of the stock market post-9/11 was also a reason for investors to switch to property, thus pushing up prices.

Property currently offers a better return on capital compared to banks and is safer than the stock market. But there are disadvantages if the property was bought in order to let out for rental income. There are pros and cons to becoming a landlord in Brussels.

Rents for residential property follow inflation, so rents have risen slower than property prices. Landlords with property in the middle-to-top range of the rental market, which is traditionally filled by ex-patriate tenants, have been finding it increasingly difficult to let.

That is not a huge problem if the property was bought outright, but can be painful for small-time landlords with just one or two properties, if there was an expectation that the rental income would cover a mortgage.

One couple who have spent several months trying to rent out their three-bedroom house in the centre of Brussels for a year, while they are temporarily transferred abroad by the husband’s employer, have been obliged to leave it empty. The only person who is interested wants to buy it instead of renting it - exactly what they did themselves when they moved to the city 18 months ago. If they do manage to rent it out - and as the year that they are away shrinks so does the prospect of finding tenants - the money they get will just about cover the mortgage repayments.

Some agents are reporting improved demand this year over last year, for houses in the suburban communes south and south-east of Brussels. According to agents specialising in houses in these areas, properties in the upper price bracket that are properly renovated to a high standard are being snapped up more quickly than those elsewhere. The reality in most other areas is that many rental properties stay empty for months on end.

There are fewer ex-pats out there wanting to rent. Again, 9/11 can be blamed for fewer Americans wanting to travel and live in Europe. Real estate developer Xavier Mertens of Home Invest Belgium, an investment trust quoted on the Brussels stock exchange Euronext, says the reduced supply of arriving ex-pats can also be attributed to improved telecommunications and quicker and easier travel: fewer people have to live in Brussels to be able to conduct their business here. Those ex-pats planning to stay in the country for longer than a few years tend to want to buy their homes rather than rent them.

Neither have the recent European Union and NATO enlargements eastwards made as much of an impact on the rental market as earlier enlargements, because these new countries were organised well in advance and the majority of the political, diplomatic and business personnel needed for Brussels had already been based here for several years.

Mertens says there is a glut of empty rental property on the market and the wide and varied choice of property to let means anyone faced with a rental demand of €1,200 or more can easily negotiate the price down. Quite apart from the hassle of finding suitable tenants, landlords have the cost of upkeep to consider and often face a bill for renovation to meet increasingly high rental standards.

In what is now a renters’ market, tenants are demanding superior decoration and top-of- the-range fixtures and fittings as well as flexibility on the rent.

• Patricia Kelly is a freelance journalist based in Brussels.

Anyone who bought residential property in Brussels five or more years ago should be rubbing their hands with glee - they will have seen their investment almost double in market value. Prices are currently stable and look set to increase further, albeit slowly.