Navigate Your Way Through Teneife Property Prices

Nov. 28, 2007 - PRLog -- Navigate your way through Tenerife´s property prices

Confused by the conflicting figures about what is happening with Tenerife´s property prices? At first or second sight you will be. However there is a way through the maze, enabling you to make up your own mind out of the complexities.

Firstly the government in Madrid and here in Tenerife issue quarterly updates based upon the cost per square metre of constructed space, that is total constructed space, not the internal room measures.  These constructed space figures come from the escritura or deeds as lodged with the local equivalent of the land registry. These government figures are averages, so they are not much use if you are looking for a specific type of property but at least they should give us trends on overall costs of space.  

These government figures have been rising year on year and will continue to rise even if actual prices fall. Why? Because many people have under declared the actual or real selling price so that the seller can avoid some capital gains tax. But now the government has realized that it is losing a lot of money from this practice and is tightening up and chasing evaders, so people have started to declare the full amounts or maybe under declare less and this means that the government will increasingly report more accurate and higher costs, and it will take may 7-10 years until this under declaration factor is out of the government figures.

A practical example of this is the fact that in Puerto de la Cruz the difference between the actual government figures and the survey output (based upon asking or published selling prices) of the property price publisher Value It is currently 26%. Now some of this difference of 26% will be buyers getting lower prices, and the rest will be under declaration, but however you look at it, the gap is large.
Another source of pricing is the estate agent sector. They act for the seller so their interest is the highest possible price, especially as they earn around 5% as a commission. They do claim that prices are rising too, citing government figures, and their own.  And for some years now in Tenerife prices have risen and for many property has been a good investment so looking back they can assert the fact that property in Tenerife has been a good investment.

Yet today the situation is very different, and for some agents at least it’s a question of the emperor and his clothes. Although asking prices, some assert, are still rising (and they may be in some areas of quality), the reality is also is that the asking prices may be higher but the discounts buyers are getting are higher too so in reality the price paid today for many properties may be less than those of two years ago. The reality may be that no agent will want to go public and say that the market prices are falling as they think that that will be bad for their business and their clients in particular. The reality for everyone is that a house is only worth what someone is prepared to pay for it, and people are only in a position or prepared to buy something today if it has a lower price. And agents accept this reality, for a sale at 5% commission on a reduced price is much better than no sale at all.  

So how does a prospective purchaser gauge what is happening and make a knowledgeable decision?

Firstly there is no substitute for thorough research into pricing, using a solid measure that makes comparisons of value between properties – cost per square metre.  Often two apartments in the same area or even complex may be priced the same but the one with 10% more space is better value, other things being equal.

Secondly in any market, falling or rising, there will be people who want to sell quickly and hence will accept prices well below average market prices. And any buyer should be aware that whatever selling price is agreed, they need to add maybe 9% for the purchase taxes and fees. So to sell say three years later the buyer turned seller needs to get 9% more assuming no agent fee to sell. Add 5% of agents selling fees and maybe 9% for three years worth of inflation, then to break even you need 23% more for your property just to stand still. That’s a tall order in today´s market place so the secret is to search out value for money and do the research.

So start to look for value properties, priced well below the average, buy the market research or do it yourself in order to know the range of market prices,  and you may have the basis of a good deal and some protection from the vagaries of the market place. So look at the trends, see what the agents are saying, but first and foremost concentrate on that research, look for value or deals and drive a hard bargain

John Gardner,
John Gardner is a writer and publisher on property matters in Tenerife and is the director of the independent property price publisher Value It España SL, and producer of the Tenerife Property Price Guide. www.valueit.es

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Independent producer and publisher of Tenerife property prices. Provides a guide that advises buyers of the range of prices of each property type for all regions of Tenerife.

Website: www.valueit.es