zondag 7 maart 2010

Housing Bubble in Belgium....

This evening the ultimate Belgian home-building fair of the year will close the doors. The whole fair is very Belgian: free food & drinks, 80% of the visitors did not buy his own ticket but got it "from a friend/company" etc. and even the name is a Belgium compromise: "BATIBOUW" from "Batir" (means to construct in French) and "Bouwen" (means to construct in Dutch).

During the period that the fair is opened Belgian newspapers, magazines etc. are flooded with commercials of construction or construction material companies. In addition, every self respecting newspaper provides his readers with a "Batibouw" extension which typically comes with the weekend edition of the newspaper. When I was reading some articles in one of these "Batibouw" extensions I was just wondering if they were written by the same guys that bought the advertisement space. In the newspaper "De Standaard" an editor stated in an article (http://http//www.standaard.be/artikel/detail.aspx?artikelid=DMF20100222_086&kanaalid=892) that home affordability did not got worse since 2004!!!!! But it can be worse: the magazine "Netto" that comes with the newspaper "De Tijd" wrote in an article (http://netto.tijd.be/dossier/batibouw/Zijn_woningen_te_duur_in_Belgie-.8299463-1811.art) that home affordability today is "as it has always has been" and that "one succeeds in buying home because he does not know that it is impossible".

It is a, and I consider my words, a real scandal that such articles are written in quality newspapers like "De Tijd" and "De Standaard". Using publicly available statistics (
http://statbel.fgov.be/nl/modules/publications/statistiques/arbeidsmarkt_levensomstandigheden/Fiscale_inkomens.jsp, http://statbel.fgov.be/nl/modules/publications/statistiques/economie/Verkoop_onroerende_goederen.jsp) household incomes and housing prices I was able to make the following graph which shows how the affordability of houses dramaticly decreased. This graph shows the ratio between the average house price and the average net household income. The graph can also be read as the number of years an average Belgian family has to work to pay his house without spending on living costs.

This ratio just exploded from 2,63 back in 1993 to 6,4 in 2007! As you can see, the real explosion happened after 2004. Between 2004 and 2005, the average house became an average year income more expensive. What happened between 2004 and 2005? Three major things which formed a deadly cocktail for "Jan Modaal" or "Jean Normale" (aka John Doe):

  • In Flanders, a revision of the "spatial structure plan" came in effect which decreased the number of parcels available for home construction
  • A fiscal amnesty operation which brought more 5,7 Miljard Euro back to Belgium
  • And, last but not least, low interest rates.....

Following graph shows the percentual increase of the house prices in Flanders and Walloon. The figure shows clearly that, as from 2004, house prices increase more in Flanders than in Walloon. As the low interest rates were a driver between the house prices in both regions the difference in increase should come from the "spatial structure plan" or .... there was more black money in Flanders :-) The Fiscal Amnesty came in effect on 16/01/2004. The degree to which property in Flanders outperformed property in Walloon, especially in 2004 is just too coincidental.

However, there are limits and average house prices seem to have reached these limits in Q3 2008! Since then there has been a decrease during 3 quarters but, last quarter property prices regained. A "shoulders - headers - shoulders" pattern that indicates a trend change? The future will tell!

zondag 28 februari 2010

Sapere aude! (or "dare to think!")

Why this blog? Do I consider myself equal to Emmanuel Kant? No, but his credo "dare to think" is more actual than ever. To many people just follow a consensus opinion. This complex and fast developing society requires from his actors (me and you) to be informed, critical, analytical and rational. However, never was the number of people acting according to these four principles so low. The housing-bubble and subsequent economic crisis can be seen as a proof of this statement. In this blog I will make some reflections within certain areas of interest (economics, technology, politics) in the spirit of Descartes & Kant.