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The depreciation of property.

One of the fundamental issues, when taking data during the on-site visit during the valuation process, is the undervaluation, depreciation or, where appropriate, appreciation of the property being appraised.

In many cases, the difficulty in carrying out an appraisal that is as close to reality as possible lies in the fact that the owner, especially when he is the second or third owner in the property’s registry history, is unaware of and has no control over the date on which possible improvement works have been carried out on the property and other details that, at first glance, are not visible during a visit to the property. The works carried out would be indicated in the corresponding invoice, which would bear a date from which they should be taken into account for valuation purposes, or in other documents and certificates issued by a qualified professional. All of this is logically visualised in some way in the ocular visit that the technician must necessarily carry out.

Once this first phase, which is part of the ocular visit, has been completed, the valuer himself can know approximately the age of the property if he already has a certain amount of experience that informs him about the constructive forms of the different periods and housing standards of the properties. This is important when applying the formulas and coefficients to the value calculated by the valuer.

Josep Roca Cladera (Manual de Valoraciones Inmobiliarias), points out other criteria for the analysis of real estate when there is insufficient market information and when there are doubts about the age of the property:

 1. Equality of surface area or construction quality of the comparables.

In short: This requirement can be relaxed if the price per square metre is taken into account rather than the price of the house, but the costs for each type of construction must be ascertained, and comparisons should therefore be restricted as far as possible in cases of very different floor areas. Also in cases where the difference is not quantitative but qualitative; this means that one has to be very careful in the analysis of comparables, especially when there is a large qualitative difference in the same neighbourhood or environment: the case of a neighbourhood where large, high-standard dwellings and small, low-quality dwellings predominate. «In the residential market, the size of the dwelling is an unequivocal indicator of quality». Therefore, a comparative analysis could not be carried out in this case.

2. Types of building: semi-detached, detached single-family or multi-family.

This is the case of the coexistence in the same urban area of single-family and multi-family buildings, and within these, of qualified buildings (low-density detached blocks with private common services, such as garden, swimming pool, etc.) or common buildings (detached or built along the road alignment). The costs of construction in the different types of buildings will vary and, as long as the qualitative difference does not reflect changes in supply/demand, can be compared.

 3. Use different standards: new, second-hand and old. 

In terms of age, buildings can be compared from evenly matched periods in which there have been no major qualitative changes in construction, for example: buildings constructed prior to the 1960s can be compared, which we call «old»; from this period onwards, major technological and structural changes took place in the housing construction sector. In our real estate market, second-hand properties are considered to be those that are around 5 years old and have been the subject of a first transaction (since this is when the depreciation of the property begins).

4. If they are not in the same neighbourhood, they may be comparable under certain circumstances.

If the substitute neighbourhoods coincide, at least tendentially, in socio-economic profile, in their level of accessibility to the centre, in the predominant quality, which we define as «normal», of their buildings, in the degree of desirability of the urban environment (public services, level of pollution, quality of urban development and abundance of open spaces), then a comparative study would be possible by extending the sample of comparables.