The Unassuming Economist

“Real estate prices have continued to increase steadily through the financial crisis, outpacing increases in other advanced countries,” according to the IMF’s annual economic report on Belgium. It says that “prices have increased by 60 percent in real terms since 2000, and—unlike in other EU countries—there has been no price correction during the crisis. Marked increases in price-to-income and price-to-rent ratios relative to historical average suggest significant overvaluation. However, these measures do not account for the fact that housing was relatively inexpensive to begin with, and that there is therefore a large catching up effect underlying the rise of these indicators. Also, the rental market is very narrow as it is focused only on low-income social housing on one hand and high-end apartments in Brussels on the other. A broader assessment, including a comparison of absolute price levels relative to the rest of Europe, suggests that the degree of overvaluation is of the order of 5 to 20 percent.”