The Belgian housing market continued to perform well in recent years despite successive crises. Nevertheless, a weakening of buying and construction activity has been noticeable in recent quarters. This takes place against the backdrop of rising interest rates and is accompanied by lower annual house price growth dynamics. Together with strong nominal income growth among households (a consequence of high inflation, automatic indexation, and robust job creation), the less exuberant house price dynamics put downward pressure on the overvaluation of the Belgian housing market. This was offset by upward pressure due to the rise in interest rates. On balance, the overvaluation, approached from an econometric model, remained between roughly 10-15%. The household debt ratio continued to rise in recent years, although that trend seems to have reversed recently. The headwinds in the housing market will likely result in a further deceleration in the nominal price growth rate in 2023-2024. Given still relatively high general inflation, that implies a house price decline in real terms.
