Capital Gains
VLM Airlines, Velocity, July/August 2007Despite its wide, tree-lined boulevards, historic Grande Place, annual jazz festival and wide-ranging selection of beers, too many people see Brussels as the home of dull, grey-suited bureaucracy. And while that might once have been true of the city, you’d be wrong to assume that Brussels is full of pen-pushers and box-tickers these days.
With its great central locations, young and well paid population, and revitalised development strategy, the fashionable tide in Brussels is definitely turning. A wave of chic designers has emerged, funky bars and restaurants are on the increase, and the cosmopolitan mix is overwhelming now that Eastern Europe has joined the party.
“Brussels has had a reputation for being boring,” agrees Eoghan Quinn, Commercial Director at Thornsett Group Belgium, which is developing new projects in the city. “But it’s getting trendy, it’s one of Europe’s great secrets and people have only just realised that, of the capitals in Western Europe, it is the most underdeveloped. Investors started moving in around three or four years ago and over the past 18 months we’ve seen even more.”
Quinn has lived in Brussels for 17 years and says that, apart from the safety and stability of the Brussels market, buyers are interested in the slow but steady capital growth of 12% to 15% over the past five years. It may be lower than several major cities in Europe, but it is also less likely to conceal any nasty shocks. He thinks the lack of interest from investors until now is surprising, considering all the city has to offer in terms of employment and investment opportunities – particularly in the rental market.
Apart from Brussels’ resident population, there are around 30,000 temporary workers in the city, most of whom are employed for two or three years at the EU, but who might also work for one of the many multinationals in the city. Then there are the members of the world’s diplomatic corps, lobby groups, NATO, the global press agencies and European civil service staff.
“There’s a strong rental market built around that employment situation,” says Quinn, “it’s quite a transient population and a transient population gives good rental returns.” One reason the investment market hasn’t been a stellar as other cities, such as Paris or London, is that a lot of the property available has been of poor quality. Older, mid-20th-century buildings have been badly designed and unattractively finished, and the pretty 19th century properties one associates with the better parts of Brussels are hard to come by. In addition, most new builds are generally left as unfinished shells, unpainted and with poor quality fittings, if there are any at all. There are none of the new, upscale, high design apartment blocks seen in other cities, but all this is about to change.
The Thornsett Group is the first company to have brought the concept of turnkey apartments to Brussels, and the idea that you can buy a flat and move either yourself or your tenant in straight away has thrown the local market into confusion. “We’re upping the standards,” says Quinn, “The spec for our apartments is much higher than local developers and we’ve had a lot of interest from investors as a result.”
The company has several Brussels projects in the pipeline, but the first to be launched is Boniface Square, a mixed residential and retail development with 28 units in the popular and bustling Ixelles area. Properties range from one bedroom, measuring 60 sq m and costing €185,000 (£125,000), up to four bedrooms, measuring 200 sq m and priced at €750,000 (£510,000) most of which have large terraces of 50 sq m.
Quinn says that so far the four-bedroom properties have seen as much interest as the one and two beds, but the bigger units are being bought by owner-occupiers rather than investors, who see smaller places as better bets for rental.
Similarly attractive is the recently launched Leopold Village, situated in what is referred to as the European Quarter on the doorstep of the European Commission. Another mixed use project but on a larger scale, the apartment complex is being built alongside large retails and dining areas, and a stylish four-star boutique hotel called Aloft.
The 108 properties here are pricier and range from studios measuring just under 40 sq m at €140,000 (£95,000) up to vast, four bedroom pads at around €1,000,000 (£680,000). “The finishings and style of these properties are definitely at the top end of the market,” says Quinn, who acknowledges that a lot of property in the city is cheaper, “But we’re pushing the envelope of what’s been done here before.”
Christos Malaxos of local agency IBP has a warning for potential investors, however, claiming that the market in Brussels has been relatively stable over the past few years, but that prices are starting to rise more quickly as large numbers of investors are attracted by the low prices in the city. He states that 65% of buyers in Brussels are currently ex-pats, but is concerned that their money is not being spent as wisely as it could be.
“Some properties aimed at rich investors are selling at around €3,000 (£2,000) per square metre, but by the time you add on all the extra taxes you pay for new-build, plus legal fees, you’re looking nearer to €350,000 (£240,000) for a 100 sq m apartment. There are perfectly nice, modern apartments with parking available in good areas of the city for €1,300 (£900) to €1,700 (£1,200) per square metre.”
The city’s prestige properties will continue to attract buyers, especially those who plan to rent the apartments out to one of the many tenants who will pay to live in central, attractively designed living spaces during the time they are seconded to the city. Typically, the leases here last three years, and Quinn points out that investors are targeting “quality tenants”, including business people, diplomats or MEPs needing a pied-à-terre. The rents usually bring in around 5% per year. In Belgium this is tax free, as are any capital gains made from selling the property after five years of ownership.
Malaxos has yet another warning, however, telling prospective landlords that there is currently a glut of rental property in Brussels. “There’s a big difference in the sales and rental markets,” he says, “Rents haven’t increased in seven years, but property prices are going up all the time. Right now the difference between what you buy for and can rent for is so big that landlords may have to pay to keep their tenants in place. I don’t know what will happen next year if prices go up but rents don’t.”
With a buy to let market that is yet to prove itself, Brussels presents an alluring proposition for those investors prepared to take a risk. Prices are still lower than in other European capital cities, but investors could stand to lose out if commentators like Malaxos are proven correct. Unsurprisingly, Quinn remains confident and advises ex-pats to buy rather than rent- and to do so as soon as possible. “At the moment property in Brussels is affordable,” he says, “And it’s going to be a bloody good investment.”