In the run-up to the International Day for the Elimination of Racial Discrimination on 21 March, a joint study by the Luxembourg Institute of Socio-Economic Research (Liser), the University of Luxembourg, the University of Cambridge and the Vienna University of Economics and Business highlights a phenomenon of systemic discrimination in the Luxembourg property market.
According to their findings, published in the journal “Regional Science and Urban Economics”, homes sold by owners with African-sounding names suffer an average discount of between 3% and 4%. This undervaluation results in a loss of earnings of around €20,000 per transaction, with losses of up to €58,000 in some cases.
To reach these conclusions, the researchers conducted an experimental online study. 689 participants from Luxembourg were asked to estimate the value of fictitious properties, with only one variable altered: the name of the seller. The name could be French, Luxembourgish, Portuguese or sub-Saharan.
The results are clear. While there was no significant difference in the evaluation of European names, those associated with a sub-Saharan origin led to a systematic drop in bids. This discrimination is not necessarily conscious: the researchers speak of statistical discrimination. In other words, buyers might unconsciously associate certain names with lower-quality properties or less-valued neighbourhoods, thereby influencing their valuation.
Generational discrimination
The study also highlights a generational divide. This discriminatory bias is much more marked among older people with fewer qualifications, while it tends to disappear among young people and those with higher education. This is an encouraging sign, suggesting that attitudes are gradually changing.
Faced with this finding, one question remains: how can these unconscious biases be limited? Using estate agents could be one way of masking the seller’s identity. However, agency fees (3% of the sale price) are often equivalent to the loss due to discrimination, making this strategy unattractive.
While Luxembourg stands out for its diversity and openness, this study shows that discriminatory biases persist, even in a country perceived as inclusive. By highlighting this phenomenon, the researchers hope to pave the way for greater awareness and measures to encourage greater fairness in the property market.
“Minority homeowners may unknowingly receive lower offers, which affects their ability to accumulate wealth over time,” analyses study co-author and associate researcher in the Living Conditions Department, Giorgia Menta. “This type of hidden bias exacerbates wealth gaps between racial groups and leads to long-term economic consequences,” she concludes.
This article was originally published in .