When deciding which property to buy, the price is probably the most important factor. For the lucky few maybe not, but there are not many of them. In last 12 months, prices in Valencia have gone crazy. But, there is a logic to this madness. They are rising not everywhere and not with the same intensity.
Looking at statistics, you can see that in the times of crisis, which started around the second quarter of 2007, prices first started dropping in villages and small towns around Valencia and then, this trend spread out to the capital of the Province, slowly working its way to the center. Believe it or not, prices were already seriously dropping in Burjassot, Torrent, Alboraya while they were still rising in Ciutat Vella. Then, in the second quarter of 2008, they started falling in the center too. If you look at the statistics, at one stage, prices outside Valencia fell up to 70% down from their peaks, while in the center, eventually, by 2014 and 2015, they fell almost 50%. In the third quarter of 2015, the trend started reversing. Firstly, the prices went up in areas like L’Eixample and Ciutat Vella, then they got followed by an increase in prices in areas like Camins al Grau, Campanar, Extramurs. The others slowly followed too. To get the idea one should look at the charts provided by Idealista.com. Some of their statistics go back to 2001. In normal times, pre2007, prices were slowly growing, like in the rest of Europe. Then, from 2007 they went down, sometimes by 10-15 % a year, and, from 2015 up again. At the moment prices are slowly creeping up to the levels of 2007. Only in 2017 in Ciutat Vella and Example according to some estimates, the prices rose about 18% and they are expected to continue this trend in 2018. In 2019 by those estimates they will get to the levels of 2007, their highest ever. It means there is still some time to buy, but the window of opportunities is closing every day.
In only one area of Valencia, Cabanyal, those statistics don’t mean much. This part of town has become a “hot” property area, hugely popular with foreign buyers. Since 2013 what happens here tends to defeat the other trends. Being a very beautiful area, close to the sea and for a long time neglected, Cabanyal is experiencing at the moment “run on properties” unprecedented in Valencia, even in the good old times.
All of this means that there are plenty of good opportunities in Valencia. For investment purposes, one should first look at the outlying areas of the provincial capital, because, as soon as those prices in the city center get to their highs, the increases in the value in the property will start overflowing to other areas. And there, prices are still very low. Some of them started moving slowly (still healthy 10% increase in 2017) but it will take at least 3-5 years before they start hitting pre-2007 levels. There are many areas around Valencia, where the average price for a square meter in 2007 was almost 2000 Euros. Today, some of them are still hovering around 1000. The reward can be tremendous and probably the best place to invest. Although, it is only my humble opinion. As I said, to understand the movement of the prices, the best bet is to look at Idealista site, because, you can clearly see the trends. What can give you even more insight is a fact that Valencia is following trends in Barcelona, (the timing is different, Valencia is about a year behind) and Barcelona is following Madrid, this time only 6 months behind. For a more conservative investor, the Valencia center is still a good place to look at. The rise of the prices in central areas of town will be slower than in 2017 and 2018 but there is still another 20% to gain.
When buying one should take into account that there are many additional costs to acquire the property and in Valencia province, they are high compared with the rest of Spain. Firstly, there is 10% transfer duty (in many other Spanish provinces only 7%), as well as an agent’s commission of 3 percent + IVA (3,6 percent in total) that is charged over here to both buyer and seller. To this expense, you must add another 1% for your personal lawyer who will check all the relevant details and whom you trust with all that money (never use the services of agency lawyer or god forbid, sellers lawyer). Add the cost of the notary, stamp duties and all in all, you will be looking at additional 15% of your purchase price. All those costs are some kind of deterrent for quick in and out of the property market. Not only you will pay an additional 15%, but once you decide to sell, your buyer will face those costs too. It means that the next market price of the property has to be at least 30% more for you to be able to recoup invested money. On top of that, there is Capital Gains Tax of approximately 20% so you can do your math.
A long time ago it was almost a custom in Spain to declare a lower value of the property for the purpose of saving on tax (it was always more beneficial for the seller) and to pay the difference in cash. Lately, this has almost disappeared. Almost. Do not even try to do it. Apart from the fact that it is illegal, you will really gain nothing. As you decide to sell, you would be hit with the Capital Gains Tax of 20%, so it will actually cost you more to hide the real value of the transaction than what it would cost you to declare it from the beginning.
As is the custom everywhere, the price is determined by the seller. In some countries, selling prices are more in touch with the market because the estate agents would estimate the property value and then, if you as a seller decide to go overboard, they would sometimes refuse to sell your property. In Spain, this is rarely a case. Since this market was in constant chaos for last 20 years, first going up like crazy, then going down like crazy, then again, going up like crazy, there are many illogical things.
What you would not expect in a country like Spain is that the published database of selling prices does not exist. The only available statistics one can go about is an average selling price per square meter. This you can access easily. Most of big Spanish property search sites have their own statistics, based on published prices, but that will give you only an idea of what are the average asking prices, not the selling ones. There are statistics published by Notaries, also ones published by TINSA, the most official one. Very often, they are mentioned and commented in the newspapers, and they come from various, sometimes even obscure sources. But, in the end, none of them will give you an idea if the property you are looking at is either overpriced or underpriced. The sellers will usually choose the highest square meter price for that area, regardless of which state their property is. They will not take into the account if the property needs lots of work, or if it is mostly redone, it will have more or less the same square meter price. Obviously, there are exceptions, but, you will have to find them one by one. The big difference is that the properties that are nicely redone will sell rather quickly and the ones that are not, will sit on the Internet for ages. Sometimes, it is rather puzzling to see how long some properties are listed, and the owners are still not reducing the price. I’ve seen many properties listed for sale for over 2 years, some even 3 years, and in all those cases, they were hugely overpriced or there was something seriously wrong with them.
Up to 2017, you were able to strongly negotiate the asking price. According to one study, the selling prices were about 20% lower than the asking prices in 2014 and 2015. Now, that gap has closed. In the Valencia city center, there is almost no negotiating. By the time you think of a good price, somebody else already snatched your property for the asking price. People are still offering about 10% less than what is originally asked of them, but, now, agents are aware that times have changed, and do not even bother to ask the owner if he will accept the price. I had a case where I offered lower price just to see the estate agent pretend to call the owner and refuse my offer. Surely, that flat was sold for an original price couple of days later, so I can’t really blame them. But, in the outer areas of Valencia, where increases are still not visible, you can negotiate very strongly. There are not many buyers so there is a time for an owner to think about the fact are you might be the only interested person he is going to see in the next couple of years. But as I said, that will change soon too.
Last but not least, if you ever encounter bank properties, you might encounter a strange system in place where they publish the reserve price, and then, through different agencies, you have up to a month, sometimes even one week, to put the better offer. They can but they don’t have to tell you what is the best offer received. It means that you will have to overbid this price if you want the property. I found this highly frustrating.
You must also take care of the strange fact that the prices can rise while you are negotiating them. On more than one occasion I have seen the property that has changed the price by the time I came back home. Either the owner was impressed by the number of people that turned to see it on the first day of sale, or he got an eager agent to persuade him that he is losing money. I know for at least 10 properties that changed prices this way, some of them went up to 20% higher. I am still waiting to see a single one of them sold.