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Rent or buy? How to use the price-to-rent ratio

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Residential sales prices have risen sharply in recent years, but rents have not lagged far behind.

Sale and rental prices in the Flanders Region: trends 2018-2020




Sale price (median) Rental price per month (average) Sale price (median) Rental price per month (average)
Terraced and
semi-detached housing
EUR 226,000 EUR 811.5 EUR 249,000 (+10,2 %) EUR 871.5 (+7,4 %)
Detached housing EUR 318,800 EUR 1,302 EUR 349,000 (+9,5 %) EUR 1,394.5 (+7,1 %)
ApartmentsEUR 185,000 EUR 697 EUR 210,000 (+13,5 %) 736 (+5,6 %)

Sale and rental prices in the Brussels Capital Region: trends 2018-2020




Sale price (median) Rental price per month (average) Sale price (median) Rental price per month (average)
Terraced and
semi-detached housing
EUR 375,000 EUR 1,518 EUR 435,000 (+16 %) EUR 1,718 (+13,2 %)
Detached housing EUR 847,500 no data available EUR 960,000 (+13,3 %) no data available
ApartmentsEUR 199,000 EUR 1,046 EUR 228,000 (+14,6 %) EUR 1,114 (+6,5 %)

Changes in sale and rental prices in the Wallonia Region




Sale price (median) in 2018 Sale price (median) in 2020 Rental price per month (average) in 2018 Rental price per month (average) in 2019*
Terraced and
semi-detached housing
EUR 140,000 EUR 155,000 (+10,7 %) EUR 617.5 EUR 652.5 (+5,7 %)
Detached housing EUR 232,500 EUR 254,000 (+9,2 %) EUR 754 EUR 790 (+4,8 %)
ApartmentsEUR 144,000 EUR 155,000 (+7,6 %) EUR 574 EUR 564 (-1,7 %)

* Data for 2020 is not yet available

Source of sale prices: Statbel, based on all deeds of sale registered with the General Administration of Assets Documentation, part of the FPS Finance.
Source of rental prices for the Brussels Capital Region and the Flanders Region: < ahref="">CIB Rent barometer, based on more than 30,000 residential leases signed in 2018 and 2020.
Source of rental prices for Wallonia Region: Research Centre for Sustainable Living in Wallonia (2018) (and Research Centre for Sustainable Living in Wallonia (2019)), based on a survey of more than 4,000 tenants

What is the price-to-rent ratio?

If you’re planning to buy a house, it can be hard to know when is the "right" time to buy. There are many factors involved in making this decision. It is not enough to just make a comparison between the monthly rental costs and the repayment cost of a mortgage on a home. The price-to-rent ratio of real estate in your region is an additional tool that may help you.

This ratio is calculated by dividing the average house price by the average annual rent. The result is a number that indicates whether it makes financial sense to rent or buy. A result of 15 or less means it’s better to buy. A result of 21 or more means it’s better to rent.

Some examples:

EUR 295,000 (average purchase price) / EUR 11,000 (average annual rent) = 26.8 -> better to rent

EUR 375,000 (average purchase price) / EUR 36,000 (average annual rent) = 10.4 -> better to buy

EUR 450,000 (average purchase price) / EUR 25,000 (average annual rent) = 18 -> price-to-rent ratio is balanced

Where can you find the data to calculate the price-to-rent ratio?

To find the specific numbers for your region, you will need to do some research. For average house sales prices you can find detailed information at Statbel. The tables can be downloaded in Excel and you can find the information by region and municipality.

The average rents are not so simple. Detailed figures per municipality are available, but these relate to 2018. You can use these figures, but it’s a good idea to increase them a bit because rents have risen in the meantime - the tables above give you some indication.

Some local authorities also regularly publish a report on rents in their municipality. With a bit of luck, you will find this information on the website for the municipality you are interested in. Another option is, of course, to contact the municipal administration directly to ask whether the figures are available.

Of course, you could also use the annual rent you pay currently in your calculation and the asking price of the property you are looking at.

How to use this formula to reach a decision

You should not consider only the price-to-rent ratio to decide whether now is time to buy a house. The price-to-rent ratio only measures whether the market as a whole is more favourable to buyers or tenants. It’s an extra tool, not a miracle formula.

You also need to be ready to buy, which is quite independent of what the numbers tell you. The price-to-rent ratio in your municipality might tell you it’s a fantastic time to buy. But if you are expecting major changes in your income, or if you regularly set off in search of new horizons, you may be better off renting.

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This article does not contain any investment advice or recommendation, nor a financial analysis. Nothing in this article may be construed as information with a contractual value of any sort whatsoever. This article is intended for information only and does not constitute in any way a commercialization of financial products. Keytrade Bank cannot be held liable for any decision made based on the information contained in this article, nor for its use by third parties. Every investment entails risks such as a possible loss of capital. Before investing in financial instruments, please inform yourself properly and read carefully the document "Overview of the principal characteristics and risks of financial instruments" that you can find in the Document centre.

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