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The government will lose € 3.3 billion in income from construction and real estate this year due to corona alone. And it doesn’t get better right away.
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The 320,000 people who work in construction and real estate in Belgium have largely returned to work. In the run-up to the construction leave, they try to make up for the backlog as much as possible. The year cannot be saved for many companies in the sector. And that also has serious consequences for the Treasury. As a result of the corona crisis and the lack of its own recovery plan for the construction and real estate sector, the government will miss out on 3.3 billion in revenue this year alone. The Confederation of Construction and the Professional Association of the Real Estate Sector (BVS) calculated this at the request of De Tijd. Last year, the government still cashed 21.5 billion euros.
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For years, the construction and real estate sector has generously fed the Treasury of the federal and regional governments in this country: 45 percent of the turnover from construction flows back to the government through VAT, personal income tax, corporate tax and RSZ. In new construction, that share even rises to more than 50 percent. For every square meter less new construction, the government receives 1,350 euros less.
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“And it really doesn’t look good. Not for this year, but not for the years to come, “emphasizes Robert de Mûelenaere, managing director of the Construction Confederation,” 4 out of 10 of our companies think 2021 will be an even worse year than 2020, “adds Olivier Carrette, the managing director of the Professional Association of the Real Estate Sector (BVS). They regret that neither the federal nor regional governments took any specific measure to temporarily boost demand for construction and real estate during the 2009 financial crisis under the Leterme government.
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Trend break
Construction grew by an average of 2.5 percent per year between 2000 and 2018. In the period 2020-2022, growth will remain limited to one percent accumulated over three years, the Federal Planning Bureau predicts. That is a growth that is barely one-eighth before the corona crisis.
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The very modest growth over three years hides a roller coaster. The Planning Bureau expects construction to shrink by 11.6 percent this year, but to grow by 9.9 percent next year. For comparison. In 2009, the low point of the financial crisis, the contraction was limited to 1.7 percent.
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Shine
The governments have convinced themselves that construction is easily struggling through the crisis on its own. Nothing is less true.
Robert de Mûelenaere
Managing Director of Construction Confederation
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“The governments have made it clear that construction is easily struggling through the crisis on its own. Nothing could be further from the truth, ‘says Rober de Mûelenaere. The average order book in February was still a comfortable 6.1 months. Since then it has fallen to 5.4 months every month, the lowest level in five years. Orders are canceled and too few new orders arrive.
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At the end of the lockdown, there was a rush at the offices of the real estate agents, especially on the coast. “But that was in the first place a catch-up weighting on the housing market and the share of the coast should not be overestimated,” explains Olivier Carrette.
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According to ING’s last month survey, 60 percent of investors have postponed their real estate project. The Federal Planning Bureau assumes a 14.6 percent decrease in residential investment. The demand for retail real estate is flat and due to the many working from home there are few plans to build new offices.
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It is also emphasized that there is not really a surplus of housing in Belgium today. And certainly not sustainable. An additional 30,000 new families are to be housed each year. Scarcity can accelerate house prices. The percentage of Belgians who can still buy their own home is falling.
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Banks
The construction and real estate world are not pleased with the attitude of the banks. “Despite the opportunities and guarantees they get from the government, they have increased their margins by 50 basis points since the outbreak of the corona crisis. If a developer wants to keep his margin, the realization of a new-build home will quickly cost 2,000 euros more expensive, ‘says Carrette. There are then two options. Either construction and real estate have to do with a smaller margin, or the house becomes more expensive for the buyer. For construction companies, margins have been paper thin for years (3.44 percent in 2018).
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Despite the guarantees that the banks receive from the government, they have increased their financing margins by 50 basis points.
