Fair valuation, fair market

Valuations are considerably more than a formality when applying for a mortgage. The valuation of real estate determines not only the purchase price or the amount of financing but also influences tax levies, rent regulation, and even the investment willingness of institutional investors. This topic therefore affects both the individual buyer and the broader functioning of the Dutch economy.
Yet, the practice of real estate valuation and appraisal faces significant challenges. Varying outcomes between appraisers, sometimes amounting to hundreds of thousands of euros, undermines trust. The temptation to precisely align the appraisal with the agreed-upon sales price makes the process vulnerable to price increases. At the same time, digitalization and artificial intelligence are forcing the sector to innovate, while regulations and quality assurance lag behind. The question, therefore, is: how can a new government ensure that real estate valuation becomes more reliable, transparent, and future-proof? Three policy recommendations are essential.

Quality assurance and independent supervision

The first and perhaps most important recommendation is to strengthen the quality assurance of valuations. Currently, we see that valuations are often unspecific and too closely related to the purchase price. This reinforces the upward price sentiment and undermines confidence in the market. A new government could intervene here by increasing the role of independent oversight. Consider strengthening the Valuation Board, which currently primarily oversees WOZ valuations, but which could also play a role in quality control of private and commercial valuations. Furthermore, consideration could be given to tightening the guidelines for valuers, for example, through stricter requirements for the substantiation of valuations and greater transparency regarding the reference objects used. Best practices can be found internationally. In the United Kingdom, valuers are required to provide detailed justification for their valuations, and random checks are carried out to ensure the substantiation of the substantiation. Such a system would also contribute to restoring confidence in valuation practice in the Netherlands.

Digital valuation with a human touch

The second recommendation focuses on the technological revolution rapidly transforming the sector. Increasingly, models are using artificial intelligence to determine valuations based on market figures and data from the Land Registry and the WOZ (Valuation of Immovable Property Act). This has advantages: AI models can work faster, more consistently, and are less susceptible to human bias. However, there are also risks. Algorithms are only as good as the data they feed, and if historical data contains skews, AI will simply reproduce them. Moreover, the human touch can be lost: an algorithm cannot account for unique contextual factors such as the state of maintenance or the experience of a location.

The new government should therefore pursue a two-pronged approach. On the one hand, it should encourage digital valuation, for example, by harmonizing data standards and formats and subsidizing innovation. On the other hand, it should legally enshrine the human touch: every AI-driven valuation must be validated by a certified appraiser who assesses the context and nuances. This will create a hybrid model in which technology and expertise reinforce each other.

Real estate valuation as part of socio-economic policy

A third and often overlooked dimension is that real estate valuation is not just a technical matter, but also a social one. The way we value real estate influences the accessibility of the housing market and reinforces or weakens social inequality. Take the affordable rental sector, for example. Rent regulation is directly linked to the WOZ value, which can mean that rising house prices automatically lead to higher rents, precisely for the groups already under the most pressure. Or consider tax incentives: high valuations lead to a higher tax burden, which can disproportionately affect certain groups.

In addition to several other ongoing issues, the new government also has an opportunity to make a difference in real estate valuation. By strengthening independent oversight, embracing digitalization without losing the human touch, and explicitly linking real estate valuation to social policy, the Netherlands can build a more robust foundation for the housing and real estate market.

This article previously appeared on Vastgoedjournaal: https://vastgoedjournaal.nl/nieuws/69857?