Belgian real estate market lacks price transparency

This month, the French government launched a new open data portal with information about all residential real estate transactions. From now on everyone can consult the address and the price for each transaction of the past five years. With this initiative, France follows in the footsteps of other European countries such as the Netherlands and the United Kingdom, who have chosen to make the real estate market more transparent for every (potential) buyer or seller. The Belgian real estate market would also benefit from having transparent transaction prices.

For many people, purchasing a home is perhaps the most drastic financial operation of their lives. Structured information about the transaction prices of other comparable properties can make the real estate market more transparent and fairer. While the data exist, it is currently not publicly available in Belgium. By not publishing this data, the government maintains the information asymmetry between specialists and laymen, and this is at the expense of the average buyer or seller. If the government is concerned with its citizens, it makes this data publicly available so that everyone can easily consult the history of real estate transactions in the region relevant to him/her.

The latest example of how things can be improved is France, where a new open data portal has been launched containing all real estate transactions of the past five years. Like several other European countries, France opts for a model of complete transparency: the address, the price and some general property characteristics of each real estate transaction are available. When selling a home, all parties involved therefore have a more complete view on the market price of other relevant homes which can serve as a benchmark. This not only gives the average buyer or seller a highly valuable and reliable frame of reference, it also offers new perspectives for specialists in the real estate sector. This allows them to further innovate and where possible improve their product offering.

Institutions such as Statbel, Fednot and Febelfin regularly publish figures on Belgian property prices. Various media outlets also publish this data in an attempt to meet the strong demand of the average Belgian for price information on the real estate market. However, these publications have the limitation that they are averages, calculated per municipality. They lack the granularity that a buyer or seller is really looking for. Of course it is useful to know the average selling price of a house in Antwerp. But if you are about to buy a house there, you really want to know at what price similar houses in the nearby area have been sold in recent years.

For a correct valuation, you, as a seller or buyer, therefore have every interest in having a transparent overview of the market prices of homes that were sold in a recent past. For a very long time already, every real estate transaction in Belgium is being registered with the government, so the data exists. It is a missed opportunity that it is not publicly available because objective market prices can reduce the current asymmetry of information between specialists and laymen. The specialists are the parties with market knowledge such as real estate agents, appraisers, notaries and real estate investors. They already have a good view of the prevailing market prices and in this way acquire a competitive advantage over, and sometimes at the expense of, the average buyer or seller, the layman.

In the aftermath of the financial crisis of 2008, a new legislative framework was created at European level to increase the transparency of the financial markets, also known as MiFID. One of the main goals of this was to protect the average retail investor against the large financial institutions by creating a level playing field. Due to the post-trade transparency obligation, it is now mandatory for every purchase and sale of a financial instrument to state after the transaction what has been traded, how much and at what price. This results in a market where it becomes much easier to determine the correct price of a share, a bond or any other financial instrument.

Of course, the real estate market does not function in the same way as the stock or bond market, but the concept of transparent market prices can be perfectly replicated. The party best placed to achieve this is without a doubt the government. They have a view of the entire picture and can act free of any conflict of interest. In recent years, the Belgian government, both federal and regional, has already shown by opening up different data sources that it is possible to successfully implement such initiatives.

Since the 1st of April, the Flemish tax authorities have an estimation tool that can be used in the context of an inheritance. This tool, based on historical transaction prices, can help people with the valuation of an inherited home. It is a first experiment by the government to do something with all its transaction data. However, it would be much more powerful to make the underlying data publicly available and thereby put the focus on creating the transparency that every efficiently functioning market needs.

This is a translation from the original article, written in Dutch, that has been published in the Belgian newspaper De Tijd on May 23, 2019. A translation in French has also been published in the Belgian newspaper L’Echo on June 06 2019. While the article specifically focuses on the lack of price transparency in the Belgian real estate market, the same philosophy applies to basically any other country in the world where transaction prices are not yet public.