Confusing Valuations
Posted on Jul 22 2010 by Barbara in General

In the past I’ve had some very harsh things to say about property market statistics in Spain, e.g. in my 2010 Annual Reportin the section titled Silly Statistics, (still available as a podcast here) yet they are still trotted out as the basis for analysis of the market by lots of commentators but as far I can see when the raw data is flawed that must make the opinion skewed. It’s true that just about everyone now acknowledges that the official Ministry of Housing figures are completely worthless but more credence is often given to the data that comes from companies like TINSA and Valtechnic. They are, after all, two of the biggest valuation companies used by Spanish banks for mortgage valuation purposes. You’d think that as they spend all their time assessing property values they might get it right more often than not.

Wrong! In June I viewed a duplex penthouse on the beach at San Pedro de Alcántara near Marbella. It was huge and as well as the main apartment there was an 8 metre private swimming pool on the terrace and a separate apartment with its own access. It was a bit tired in places but nothing that a lick of paint wouldn’t fix and anyway the position was outstanding, literally no more than 100 metres from the beach. At the top of the market I would have expected it not far short of €1 million so when it was offered to me for clients looking in that specific area at €695,000, with the clear indication that an offer under €600,000 would be considered, I went to take a look. In the end it wasn’t for them and they bought a brand new house round the corner, but the apartment quickly went under offer at €585,000, representing a loss to the seller who bought it in 2008.

The buyers needed a mortgage so in went TINSA and how pleased must the purchaser have been with the resulting €900,000 valuation. Which planet are these people on? Perhaps they really do believe the Ministry of Housing figures that keep telling us that prices in Spain have fallen 10-15% at worst when I haven’t been involved in a transaction in the last 18 months at less than 30% down and as much as 40% in a couple of cases. But based on this valuation the buyer decides to see if there’s the possibility of improving his mortgage offer and approaches other banks, one of which does make him a better offer but they don’t use TINSA, their preferred valuer is Valtechnic. Result – one very confused buyer because according to Valtechnic the property that TINSA value at €900,000 is actually worth only €550,000, a tad below what he is paying.

I think one of the biggest problems facing buyers in Spain in the current market conditions is knowing what something is actually worth and confusion like this from industry professionals in not helping. In my view the guy from Valtechnic has it about right. My clients who rejected this property and bought the new house close by paid €555,000 and without question, the house is worth more than the apartment. They too wanted a mortgage and the valuation came in at €681,000. At the top of the market the identical house next door was bought for €850,000 and I think on balance my client is paying about right price, roughly 35% down from 2008, the valuation was fair and everyone is happy. I can’t wait to hear whether the apartment deal goes through or if the buyer is so stunned by the second valuation that he has second thoughts.

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2 thoughts on “Confusing Valuations

  1. You’re spot on with why people are having a hard time with home valuations today. Buyers don’t know where the market is yet and are waiting on the fence, while sellers are budging more and more. Spain sounds like it would be a great place to buy a home…but at those prices? I could just travel there from time to time and save the rest for my retirement and cruises.

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