In an uncertain economic climate, marked by financial market volatility, rising interest rates, and increasingly complex real estate regulations, Belgian investors are asking themselves this question more and more often: Should they still invest in real estate?
For Shelter Investment Management, the answer is clearly yes… but under certain conditions.
Founded about ten years ago by Benedict Peeters, a former investment banker at Deutsche Bank and Morgan Stanley, Shelter Investment Management is an asset management firm based in Luxembourg but with strong ties to Belgium: 98% of its assets under management come from there. Today, the firm manages approximately 1.2 billion euros for clients seeking comprehensive and well-thought-out wealth management.
For Benedict Peeters, the president of Shelter IM, a well-constructed portfolio must, of course, include traditional financial assets—stocks, bonds, funds—but real estate remains an essential alternative, particularly at certain stages of life.
“Many people consider the home they live in to already be part of their real estate portfolio. That’s true, but it’s a very conservative view, especially with retirement in mind,” he explains.
In his view, owning income-producing real estate in addition to one’s primary residence can make perfect sense, especially for young or middle-aged investors, provided they properly assess their debt capacity and the prospects for rental income.
A “perfect storm” on the Belgian market
The problem is that the rules of the game have changed. “The simple real estate math of the ’80s or ’90s no longer works,” notes the founder of Shelter IM.
The Belgian market is experiencing what he describes as a “perfect storm”: increasingly strict energy standards, sharply rising construction and renovation costs, more expensive materials, high wages, heavy taxation, not to mention VAT rates that are sometimes prohibitive and vary widely.
The result? Building or renovating is now very expensive, especially for homeowners who don’t do the work themselves. Pre-COVID prices seem like a thing of the past, while the cost of energy, materials, labor, and service providers, among other things, continues to strain the budgets of developers and homeowners.
Added to this is a shortage of quality properties. High-quality homes priced below 400,000 euros have become scarce, especially in Flanders. And as for the banks, while short-term interest rates have become more acceptable again, securing financing remains more difficult for projects deemed risky or very large in scale.
“There are very few buyers capable of raising several hundred thousand euros in equity. And at the same time, affordable properties are becoming increasingly scarce,” summarizes Benedict Peeters.
For rental investors, new construction is often preferred, but there, too, prices are skyrocketing, which is weighing on profitability.
Keep an Eye on Profitability
In the traditional residential market, Shelter IM estimates that a gross return of 3 to 3.5% is acceptable for new construction. For more expensive properties, the return sometimes drops to 1.5 to 2%, which limits the appeal of the investment.
The ideal target remains a yield of 5% or even 6%, which is possible, for example, with student housing, but such opportunities have become rare.
“Buying an apartment for 250,000 euros and generating 1,000 euros in rent per month is a good deal. But in practice, this is becoming less and less common,” he acknowledges. Not to mention that a property held for 20 years will almost always entail significant costs down the line (replacing a boiler, etc.).
Shelter IM has also observed growing interest in real estate abroad, particularly in Spain. In some regions, it’s still possible to find properties under 200,000 euros, especially in the inland areas, about twenty kilometers from the sea.
Belgians are particularly well-represented on the very European Costa Blanca, while the Costa del Sol attracts a more international clientele. The Costa Brava, on the other hand, remains more distinctly Spanish.
But be warned: while returns may be higher, so is the risk. The Spanish market is more cyclical, more volatile, and subject to specific constraints such as obtaining—and renewing—tourist rental licenses, which are no longer guaranteed to be issued automatically, as they were in the past.
Belgium: Stability, but Low Returns
Conversely, Belgium remains a very stable market, but one that is often not very profitable for rental properties. The housing stock is aging: out of approximately 5 million residential units, 50,000 homes would need to be built or renovated each year to achieve a full renewal every 100 years… whereas only about 38,000 are currently being built or renovated.
After 2030, selling energy-inefficient properties (PEB F or G) will become increasingly difficult. According to Shelter IM, the government will need to take action—such as reducing costs, making tax adjustments, or providing clearer support for renovation—to reduce uncertainty for investors.
One final key point: the investor’s age.
According to Benedict Peters, direct real estate has a legitimate place in the portfolio of someone in their thirties or forties. But after age 65, this share should gradually decrease
. “Beyond age 70, you need to sell or pass the property on. I know quite a few people who are 65 or 70 and in great shape, but the probability of living to 100 is minimal. However, estate taxes can reach 25 to 27 percent for direct heirs. It’s often smarter to plan ahead through staggered gifts. “In my view, anyone who still owns property at age 70 or older really needs to consider selling or transferring it through a gift,” he advises.
In summary, real estate remains a powerful tool for building and passing on wealth. However, in a context that has become complex, it requires—more than ever—a comprehensive, structured, and guided approach…
