Spanish Property Valuations

Share Diana Morales | Mar 13 2007

Our 25 years of experience in the local market, and extensive knowledge with property values on the Coast, enable us to provide you with a highly accurate valuation of your property – a distinct advantage when considering multiple offers. The following is an excerpt from the article ‘Valuations’ in Highlights magazine, 2nd edition.

DM Properties Marbella Valuations ExpertThere are certain technical means by which a property is valued and we list them here. They can appear, at first sight, to be complicated, but such is the legal system in Spain that it is far better to follow them and to take the advice of the professionals. Formal property valuations are governed by the Ministerial Order of 30/11/94, in which it is established that sound judgement and factual data are used in all valuations.

These may be based on one of the following. maximum legal value, cost of replacement, or market value, depending on the property being valued and the exact purpose of the valuation.

Maximum legal value

The maximum sales price of a property, which is subject to the controls of subsidised housing.

Replacement cost

The total required investment to reconstruct the property with the same characteristics. The physical and functional depreciation of the property are variable and must be taken into account in the calculation.

Market value

The net value that could be expected to be achieved by a seller for the sale of the property at the time of the valuation, by means of proper marketing and assuming that there is a ready, willing and able purchaser. It also assumes that both the seller and purchaser are acting under their own free will.

Calculating market value

The legislation also defines the distinctive methods that can be used to calculate the market value: Comparative market analysis, fixed residual value, and capitalization of the current income yield. Other methods such as the dynamic residual value and the capitalization of projected income yield are more complex, since they introduce the parameter of time.

Comparative market analysis

This is based on the principle of substitution, in which the value is calculated from the recent sales of 6 properties with similar characteristics.

Fixed residual yield

The method of fixed residual value is based on the principle of greatest and best use, taking into account that the property will have to adapt to changing conditions, provided hat it is economically viable, to obtain the optimum and most intense use possible that evolves in its specific sector of he market in accordance to the location, planning characteristics.

Capitalization

The final method, capitalization of the current income yield, is defined as the price that an average investor would pay for the acquisition of a property in function of the expectations of the yield derived from its exploitation.

Life span

The life span is determined in function of the type of property: residential property has an estimated life span of 100 years; offices have 75 years; commercial buildings have 50 years and 35 years for industrial premises.The valuations are normally made on the constructed area of the properties, and this is why it is important to have the right measurements. Frequently, the built area indicated in the escritura does not reflect the actual area, either because it originally failed to include all the construction, or because there have been extensions made at a later date.

Please do not hesitate to call DM Properties if you require further information.


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