Profile Belgium: Brussels, the cheapest capital city in Europe, has it all, reckons Judith Crosbie - beautiful architecture, steadily rising prices and solid prospects

Imagine a major European city where houses and apartments can be bought for nearly half of what they go for in Dublin, where properties often sell for below the asking price and where dinner party and water-cooler chat is not dominated by talk of land.

Welcome to Brussels. The city of baroque façades and art nouveau décor has seen annual property price increases of up to 10 per cent over the last four years but has not experienced the overheating that is the hallmark of the Irish market.

Brussels will always have an attractiveness that most other cities can only dream of. Apart from the beautiful architecture and quaint squares, it is considered one of the gastronomical centres of Europe and an efficient public transport and road system means it is a very pleasant place to live.

But what draws most foreigners to work and live here is the fact that it is home to the European Union and NATO headquarters.

Apart from the officials and politicians who work in these institutions, there is a myriad of consultants, lawyers, lobbyists, journalists and think tanks that are located in Brussels.

Despite this, Brussels is the cheapest capital city in Europe for property - the average home price is €182,211 compared to Dublin, which is the fourth most expensive at €330,000, according to a survey brought out in September by the French property group, Era Immobilier.

Vassilis Misthos, of the Brussels estate agent Globali Property Management, says this is because up to now there has been no shortage of land to build on in the city.

This has also led to a large amount of good, cheap rental accommodation on the market which was one of the reasons why the arrival of thousands of officials from the 10 new EU members states last year didn't drive up property prices. Misthos adds that Belgians who work in Brussels like to live outside the city - up to 100kms away - so there is not the usual pressure on space that can be seen in other capitals.

While big Irish investors seem very interested in the market - Irish groups bought offices worth €34 million and €20 million recently in the capital - individuals who come out to live here are also keen to get on the ladder.

"I pay tax to the Belgian authorities which is considerably high and will get tax relief if I buy over here," says one Irish executive in her 30s who arrived nearly two years ago and has just started looking for a house.

"For less money than I would pay in Dublin I can get a larger, nicer place out here," she adds.

Another Irishwoman who has worked for the European Commission in Brussels for the last seven years says she bought her house out here two years ago because of the incredible increases in property prices going on back home.

"I knew I'd never be able to afford to buy in Dublin but, after five years living here, I had no plans to leave and just wanted to get on the ladder."

Her two-bedroom, ground-floor apartment, which is centrally located and five minutes walking distance from a metro station, cost €139,000 in 2003 and is now worth in the region of €160,000.

Also close to metro stations and relatively centrally located are the following: a five-bedroom townhouse in Forest for €475,000; a three-bedroom house in Etterbeek for €328,000; a three-bedroom house close to the EU institutions for €165,000; a one-bedroom penthouse apartment in Ixelles for €190,000.

But the market isn't all rosy. Stamp duty in Belgium is 12.5 per cent and other fees to the notary, who performs the function of a lawyer, and the mortgage lender can drive the overall cost up by as much as 17 per cent of the value of the property.

However, if the property is located in an area where the authorities are encouraging people to live in, the stamp duty may be less than 12.5 per cent. If the property is sold within two years, some of the stamp duty can be clawed back but, if the property is sold within five years, capital gains tax of one-third is levied on the profit made. After five years no capital gains tax is liable in Belgium.

For people resident in Ireland who wish to buy property in Brussels as an investment to rent out, there is no tax charged in Belgium on the rental income - but tax on this income will have to be paid to the Irish authorities. Similarly, even though capital gains tax on profit expires after five years in Belgium, Irish people selling an investment property will have to pay capital gains tax to the Revenue Commissioners.

Many people involved in the Brussels property market are confident the high yields will continue.

"It's never going to be like Paris or London because Brussels doesn't draw as many people in as those capitals, but it will grow further," says Patrick Menache, of the Brussels real estate agents Macnash Associates.

To get good value out of the market, he advises people to be careful where they buy. The trendy area of Ixelles is now over-priced, according to Menache, but just a few streets over in Saint Gilles or Forest the same type of properties in similar areas can be bought for 30 per cent less.

These properties may include the large, ornate townhouses (maison de matîre) or modern apartments. Similarly, while the EU-dominated Etterbeek area is expensive, nearby Saint Josse has some good bargains, says Menache.

Misthos also feels prices will continue to go up: "I am confident the prices will keep moving in the 9-10 per cent manner we have seen recently."

But Ivan Van de Cloot, an economist with the Belgian bank ING, says with interest rates likely to go up across the euro-zone and the fact that price increases have already been high, the market should be producing lower increases of about 4 per cent.

"There is a temporary over-shooting of the market to be expected but, in the interests of a stable economy, let's hope it won't last too long."

"We have seen from other countries that a price decrease probability is almost zero but, if you were to bet on a continuing price increase of 10 per cent or more, then you might be better off going to a casino because the risk is too great," he adds.

In many ways this is what makes the Belgian market attractive - the increases may not be as high as the Spanish, Irish or British markets, but the key word is stability.

Claire Hughes, associate director of Hamilton Osborne King, which helps private investors buy properties in Brussels, says people will always be drawn to the city for this reason.

"For property investors who recall the fluctuations in the UK and elsewhere in previous property cycles, the lower risk profile of Brussels is a very comforting attribute."