Market and Price Developments
These share deals, as it is called in real estate jargon, obscure the picture and result in a low number of observations, explains Ishaak. No assets are being traded, but shares in empty BVs in which the real estate is housed.And that is a problem when you want to keep track of market and price developments as a supervisor. It is unclear what prices are being paid per object in such a share transaction. In the transfer of large real estate packages, there is often a quantum discount, just like in the supermarket. If you do not know the amount of that discount, you do not know the actual prices paid.
Quantitative Research
Ishaak encountered the problem through his work at CBS. He studied public administration, but after his studies, he mainly focused on quantitative research: putting numbers in a row and comparing them. Since 2013 he has been doing this at CBS, as production leader for construction and real estate prices. This department publishes the price developments of Dutch buildings monthly. Since the financial crisis of 2008, after the bankruptcy of investment bank Lehman Brothers, his department was given a task by the International Monetary Fund (IMF) and the G-20: to help clarify real estate bubbles.
Insight into Commercial Real Estate
Like colleagues in other countries, the statisticians at CBS developed indicators to provide insight into the real estate market. How do you do that in commercial real estate? Usually, the methods used for the residential market are applied without adjustments. But that results in a large margin of uncertainty. Share transactions in this sector are not always transparent. Ishaak calculated that more than 30 percent of all transactions in the Dutch real estate market are hidden in share deals. Portfolio sales also occur in large numbers. The method devised by the PhD candidate begins with splitting portfolios. He adds up the WOZ values of offices, commercial properties, homes, and shops. These values have been requested from the Cadastre. Based on that, he creates a distribution key with the percentage that has been paid for each object in the total amount. In addition, he developed a new index method, aimed at low numbers and heterogeneous observations. Using the open-source programming language R, he added this calculation method to the R package cbsREPS. Because this package is included in the public repository of R (CRAN), the method can be applied worldwide by R users.Housing Price Developments
Ishaak also used his method to calculate housing price developments at the municipal level. Existing methods were previously insufficiently accurate. Therefore, CBS and the Cadastre only published the price developments for the four largest municipalities. By using price information from previous periods, more accurate calculations are possible. The result is that housing price developments for 306 municipalities are now being published. The development of plot prices is also being calculated with it.Insights
What insights do these improved techniques provide? Regarding housing prices: they have risen in almost all municipalities by the end of 2024. Edam–Volendam stands out because there, prices fell at the beginning of 2023 and did not show any recovery for the rest of the year, says Ishaak. In 2024 we will only see a recovery movement with a greater difference as a result. Are we actually heading towards another real estate bubble? It does not seem so, because the price development of both residential and commercial real estate flattened out a bit in 2023. In addition, you will need to look at the financing side of real estate for that. Because the loan amounts in the previous decade have been limited and incomes have risen, we seem to be better equipped against a real estate bubble than in 2008.Applying Knowledge
The new method devised by the PhD candidate has already proven its usefulness: CBS is already using it for calculating the real estate figures presented every quarter. Statisticians elsewhere in Europe are also exploring the method for use. Ishaak: Great, because knowledge should be applied.Relevant Links
- News - Housing Prices Have Risen in Almost All Municipalities
- News - Prices of New Construction Plots Continued to Rise in 2024
- Website - TU Delft - Thesis - Improving Commercial Property Price Statistics