Today’s post looks at whether you are getting value for money when buying a property in Valencia. To decide this we must look at what we mean by the term value for money because it means different things to different people. What is the measure we are going to use? To determine this we are going to use four different metrics.
- Reference Values
- Comparative Methods
- Space and M2 Price
- National and International Comparisons
The reason why we are going to use these metrics is because it’s important to understand whether what you are buying is good value for money in more than one way and the reason for that is simple, if you only use one then what if the metric you use is wrong?
This year the Spanish Government has started using reference values to establish the taxable value of the property. Now the truth is that they are all over the place, we wrote about this in our post earlier this year. However they do give you one clear indication, whether a property is massively overpriced. The reference value is what the Spanish government thinks the property is worth for taxable purposes. The truth is that 90-95% of sales we have had this year have had the reference value under the sales price and that is good. However, we start to have serious misgivings about properties that have a reference value that is considerably under the asking price in a big city because the reference values are likely to be much more accurate with a larger sample size within a city than say for example a small village where not many sales are made.
And that brings us onto the examples I want to use to illustrate this.
We know of a property for sale in Ruzafa at the moment where the price is 525000 Euros and it’s just over 100m2. This is a quite frankly ridiculous 4500 Euros per square metre which is almost 60% above the per square metre price of the area (More about that later) Interestingly the reference value given by the Catastro is 219,000 Euros a small matter of 306,000 Euros below the asking price. As we said the reference value is usually below the sale price but being so far below the reference value in a city should be a red flag for anyone looking to purchase a property as it is probably the biggest sign that a property is massively overpriced (That and me saying “You are f***ing kidding me!” when someone shows me the listing. We do know the market you know!) You can ask me to send you the listing by whatsapp if you want.
Now you might think “That’s ridiculous” or you might be thinking “Well, it might be really nice“. If you are thinking the latter then allow me to sell you a bridge. A square metre is a square metre is a square metre and you can dress it up however you like but there should never be such discrepancies in m2 price compared with the rest of the market. Obviously there are more and less expensive properties but this is an outlier and a ridiculous outlier at that.
On the other hand, we also see the odd case where the reference value is above the asking price. This is generally a sign that you are getting a good value property. Nevertheless this can also create problems because remember, the tax payable on purchase is 10% of the sale price or the reference value whichever is the higher of the two numbers. When the reference value is higher you end up paying above the 10% tax amount.
We currently have an offer of a property for sale around the 180k mark but the reference value is 259k. This is obviously a problem. Yes, the property might well be a bargain (but in this case I actually see it priced correctly) but the issue is that the tax payable is 25,900 Euros which is an effective tax rate of 14.5%.
Trying to convince somebody that this is worth buying despite that tax rate will be difficult.
We are starting to see stories in the Spanish press of isolated cases of even higher effective tax rates because of the Reference Values and it looks like there are a lot of lawyers working on this to claim against it foreshadowing a potential class action suit in future.
We have written before about the factors that affect the price of an apartment in this post. Therefore, you can never say for sure that you are comparing apples with apples as even properties next door to each other will have different characteristics. Having said that once you take into account all of the places for sale in the local area then you can get a good idea of whether the asking price at least is reasonable, whether it is in line with the local market values or well out of line.
Fotocasa has an interesting tool for looking at this. When you look at a property it has a link underneath the listing to get to know the area more in depth and it tells you how many properties in that neighbourhood are for sale and what the average price is. As a rough yardstick this might help. It used to be more useful though as you could see the average price per m2 in the area which was a bit more helpful.
This method is only useful as a rough guide as a result but if something stands out as being massively different to everything else in the area then again it might be a red flag on something being overpriced or a good way to find out that something in massively underpriced. However bear in mind that there are better and worse areas, streets and even buildings in each neighbourhood so it should never be the only method you use to rate if you are getting good value for money.
Space and Square Metre Price
Many of our client come from areas where the square metre price is considerably higher than what they are being asked in Valencia. Northern Europe, North America, Australia and the Far East are typically places where our clients come from and they are all usually considerably more expensive per square metre than Valencia. This doesn’t mean that everything is good value for money though. It just means your method of measurement needs recalibrating.
Again it’s useful to have a look at the local m2 prices to see if what you are being quoted is reasonable. Just because the price per m2 is above the local average doesn’t mean it isn’t good value for money though. As we mentioned in the article above (Also linked here) there are many deciding factors that determine the m2 price. However if you are lucky to find two or more properties for sale in the same building then maybe you can see whether the price you are looking at is reasonable. Even then though there might be a huge discrepancy due to the state of the flat, the floor if there isn’t a lift (The higher you go the cheaper it may be), whether the place has been modernised and more…
National and International Comparisons
As mentioned above our clients come from all over the World and their usual comparison means that everything in Valencia looks relatively cheap. We also get clients looking at other parts of Spain as well as Valencia and they look at prices in Madrid and Barcelona typically but also Alicante, Malaga or sometimes Granada. Valencia compares well pricewise with all of these places with only Alicante being generally cheaper per m2. Madrid and Barcelona are often double the price of Valencia per m2 and sometimes even more.
Obviously it also compares well with prices our clients have in their heads from their home countries but you should also be looking at the reference values, the local comparatives and the actual m2 price as well as prices in “your home country”.
The Best Way To Find Out If Something is Value For Money?
We take into consideration all of the above and also our years of experience in the market. We are pretty easy to read when we get excited about a property and we are also easy to read when we think something is overpiced, rubbish or a combination of the two.
Because we tell you straight. You might be asking why we see rubbish properties though if we already know they will be rubbish?
Easy. Clients insist that it is their favourite they saw online and they only can be disabused of that notion if they actually see it and then see that we are right and that there is a reason we have told them to forget that property. Remember, photos can be deceiving. We may be wrong at times of course but it’s rare because we know the market inside out.
Why not try us?
Property of the Week
A property which when you visit you might not know where to look because it’s full of…
“Naked ladies! Do you like naked ladies? I know I do. If so you’ve come to the right listing, because this villa in Godelleta, just 30 minutes from Valencia, has quite the collection of artwork.
But if you can look beyond the exposed skin, you’ll also appreciate that this is a great villa. Curvy inside and out, the split level main living area is centred around a fire pit, windows on all sides, and that leads up to the sleeping area on the upper floor. 4 bedrooms and 3 bathrooms in this house.
Swimming pool, gardens and if you have managed to tear yourself away from the artwork, you’ll discover that they weren’t even the most interesting thing to see in the house, because the views from here are obscene.
So have a browse through the photos, try not to get distracted and you’ll appreciate what a great house this is. Give us a call and we’ll show you around. No perverts or British Conservative MPs please because we know why YOU want to visit.”
Images From This Week
And if you liked this…
Remember that we have written lots more about Valencia, in fact most anything you can think of might well be on one of our pages or in one of our posts.