17 - 18 september 2024 - Gare Maritime, Brussels

Focus UPSI – When inflation causes a chain reaction in the housing market

During the recent Realty Summit, UPSI (Union
Professionnelle du Secteur Immobilier)
organised its Board of Directors
meeting under the renovated roof of the Gare Maritime with, as every year, a
conference that attracted a well-informed audience. The theme of the 2022
edition was obvious: The impact of soaring construction costs on the housing
sector and how to reduce their effects.

UPSI had previously launched a survey among its members to provide input for the discussions based on experience on the ground. And membership feedback was enough to fuel the debate, since it emerged from this consultation that prices (total costs) had exploded by around
+20%, with a direct impact – of around +13%
on project leaders.

“The price increase is enormous for aluminium, concrete and wood, but availability is also a new problem,” said Olivier Carrette, UPSI’s Managing Director. For him, everything must be done to
maintain activity through dialogue between the parties. And in this respect, 70% of the contractors surveyed said that they still reach an agreement between the professional parties involved and the contracting authority; 30% simply do not revoke this agreement, at the risk of cutting back on their margins if necessary.

In 74% of cases, the responding contractors said that they did not have the option of revising costs upwards, either because this had not been contractually agreed or simply to avoid losing the contract, as the announcement of a price increase was particularly dangerous
for the continuation of an ongoing project financed by bank credit.

Price increase, or not?

According to Maximilien van de Werve, Partner Deloitte Legal, the agreed price increase (contractual clauses or force majeure) has a cascading influence on the relationship between the contracting authority and the contractor, and then between the contracting authority and the purchaser. “There is a lot of talk about price increases, but some prices have also come down,” he pointed out. But for Aubry Lefebvre, CEO of Thomas & Piron Batiment, whose group combines the businesses of builder and developer and is therefore a double loser, it is impossible to pass on price increases to end buyers and banks should take this into account in their credit offers. Nathalie Nieuwinckel, Director of Acquisition & Development at Vooruitzicht, points out that although its cost prices in the residential sector have increased by 12%, sales prices have only been increased by 5% on average and that activity has remained particularly strong in the first half of the current year.

Sophie Lambrighs, CEO of Eaglestone- Belgium, adds that banks are more easily pressured
to finance green projects. “In the residential sector, this is still easily
negotiable. The commitment of the banks is still there,” she insists.

Permits, the recurring theme
For 2022-2023, the same survey shows that the other most complicated parameter to manage at the moment is the length of time it takes to obtain permits, which is on average more than five years in Brussels compared to +-4 years in the other regions, with 60% of permits being challenged in court in the capital.

For Stéphan Sonneville, CEO of Atenor and 
President of UPSI for the Brussels Region, it seems obvious that the professional union must play its role in the current context. “Collecting the opinions of its members and relaying them by challenging the political class is our mission. The problem is that the latter reacts in an emergency, whereas we are pleading for a long-term approach, not only in terms of real estate but also energy. We must remain a centre of intelligence and good practice. And beyond the current situation, it is sustainability issue that must drive us forward,” he insists. 

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