The rather pessimistic forecasts are based on more than just gut feeling. Building permit applications are an important indicator. The third quarter of 2024 saw only 11,243 applications. By comparison, in 2019, there were 25,427. Keep in mind that it takes about 90 days for a permit to be approved (not counting preliminary procedures and appeals). Construction typically begins within two years. Around 70% of applications are approved, but not all approved permits are executed. Some face prolonged appeal processes, and financing is increasingly an issue.
Are the prospects for the rest of the sector any better?
Applications for renovations, reuse, and demolitions increased between 2018 and 2022 but have stabilized in the past two years. A significant push from this market segment is unlikely. 2025 will also be a slightly more challenging year for infrastructure. In the first year of a new legislative term, fewer projects reach the execution phase. Many companies are also postponing projects due to geopolitical tensions and political and economic uncertainty both domestically and in neighboring countries.
Some say Belgium’s economy is doing better than its neighbors. Does that apply to construction?
That impression does not hold for the construction sector—quite the opposite. One issue is that problems like the permit process can drag on for a long time. The Flemish government has set up an expert commission to address this. Embuild Vlaanderen fully supports this initiative and will provide input. However, we recognize that solutions will not come overnight. Many obstacles in construction stem from a patchwork of local regulations and differing visions. Bringing more clarity to these will take years.
As for renovations, we are still waiting for strong policy initiatives. The shift of taxes from electricity to natural gas could trigger significant movement, but the timing and approach remain unclear. The new Flemish coalition agreement also introduces difficult measures. The Mijn VerbouwPremie (My Renovation Grant) is being reduced. The reduced registration tax for major energy renovations has been abolished. The renovation obligation has been frozen at energy label D: buyers will not be required to go beyond this and will receive an extra year to meet the requirement.
That does not sound very positive…
We are looking explicitly to the Flemish government, which holds most of the authority in this area. Time is running out. Until 2023, construction companies in Flanders experienced relatively fewer bankruptcies than those in Brussels and Wallonia. That is no longer the case. Until 2019, the survival rates for start-ups were higher in Flanders, but that is no longer the case either.
Still, I remain optimistic about the sector in the long run. The demand for housing and infrastructure will only continue to grow. Flemish policymakers also recognize that multiple solutions are needed to resolve the construction crisis and achieve more affordable housing in Flanders.
What are your top priorities to boost the sector?
At the very top of the list are permit procedures. They must be simplified and shortened.
The construction shift? We are open to it, but regulators should focus more on what is possible rather than creating an endless list of restrictions. There are too many overly detailed regulations at the street or neighborhood level. We also support working with the government to implement digital permitting. If applicants could immediately see, at the push of a button, how a modification affects their chances of getting a permit, it would save everyone significant time and money.
There is a lot of frustration in the construction sector about tax policies.
Tax regulations should be logical, simple, and not distort competition. Unfortunately, that is often not the case. The registration tax for a first and only home has been reduced from 3% to 2%, but those buying a building plot still have to pay 12% in registration tax and an additional 21% VAT on construction. This leads to situations where homes are renovated when they would be better off being demolished and rebuilt.
At the same time, we fail to send a clear message that renovations are necessary and valuable. There was a lot of controversy around the renovation obligation, with claims that it would burden buyers with extra costs. In reality, the opposite has happened: the price of energy-inefficient homes with an F energy label is now €145,000 lower than that of energy-efficient homes with an A label (source: Fednot). This proves that the renovation obligation is a useful measure that ensures buyers of energy-guzzling homes have the budget to carry out the necessary work. In effect, the renovation obligation has become a renovation discount.
What technological innovations will have the greatest impact on the sector in the coming years?
- Modular construction will create many new opportunities. More and more companies are investing in it, and the productivity gains are enormous.
- Digitalization. The Flemish construction sector is already a frontrunner in the EU in terms of labor productivity and digitalization. Embuild aims to push this even further and ensure the entire sector—including smaller companies—keeps up. Even small investments in cameras and drones can yield impressive results. BIM (Building Information Modeling) does not have to be fully implemented immediately; even partial adoption can be extremely valuable. Standardizing and aligning systems is essential. We must move away from silo thinking, which will also lead to better cost control.
- Circular construction. We expect further progress here, especially as banks and large companies demand more detailed reporting throughout the supply chain. Business models still need refinement, but there is no turning back.
You have been Director-General of Embuild Vlaanderen for six months. What has positively surprised you?
I have been pleasantly surprised by how many members are working hard and investing in sustainability and innovation. The number of ideas construction companies bring forward and their commitment to turning them into concrete results is incredible.
Is ESG being overemphasized in Europe and Belgium? In terms of reporting, one could question whether it is always efficient. However, I see that many companies don’t need government pressure to go all-in on sustainability. They recognize the competitive advantage. No one wants to fall behind competitors at home or abroad—doing so comes at a price.
So, we need to stay ahead—or even better, take the lead. This is an economic necessity. Look at what happened with electric vehicles: European car manufacturers have been overtaken. We must not let the same happen to our sector. The right priorities must be set: more concrete projects, less focus on excessive reporting.
