Belgium

Overall construction activity

According to the ICN's initial estimates, construction fell by approximately 3.8% in 2020, much less than the entire economy (down by 6.2%). Having suffered less than the average, we cannot – in theory – expect the sector to bounce back to the same degree. However, construction (all segments combined) can be expected to rise by 5% (compared to 5-6% for the economy as a whole).

Construction is expected to exceed its 2019 activity levels, but only because of the expected increase in works generated by a number of specific projects and the rebound in public investment projected by the Federal Planning Bureau. Without these projects, of which most only concern a few companies, construction clearly remains under pressure, with a level of activity for 2021 that is likely to be around 1% lower than pre-2019 levels.

It should be noted that the Belgian construction industry maintained its production capacity in 2020, despite the significant decline caused by the corona crisis. Accordingly, the employment outlook for 2021 indicates an increase of around 1%.

Housebuilding

Following the 10% downturn in 2019, the expected rebound in new building permits clearly did not materialise. In fact, they continued to decline (down by 3.4% in the first ten months). A rebound is not expected in 2021 – permits could even decline further – given that the demand for new housing units generally reacts with a slight delay.

However, the conditions are not unfavourable: Mortgage rates have never been lower (around 1.3%), households’ disposable income is expected to rise compared to 2019 and even though the unemployment rate rose, it is still one of the lowest in the past 30 years. In addition, recent developments in real estate and construction prices are making housing starts more competitive – and that does not even take into account the fact that (under certain conditions, notably surface area) the VAT rate in Belgium is temporarily at 6% for demolition and reconstruction projects which are intended for main residences.

Including the impact of the lockdown on production and the observed and expected changes in building permits, it is estimated that activities linked to the construction of new housing fell by around 8% in 2020, but should increase by around 3% in 2021. This recovery can be explained by the fact that production should in principle no longer suffer from the impact of a lockdown and that the lockdown delayed the granting of building permits, which postponed part of the execution of construction works to this year.