Kyero.com versus Ministry of Housing
September 25th, 2006
Danny Lawrence emailed us with some strong thoughts about our price guides. In this article, Danny shares his concerns and Martin Dell of Kyero.com attempts an answer. Take it away Danny..!
I have just browsed through your new price guide and whilst I appreciate that it represents a huge amount of research and work I’m sorry to say that it is of little real value as the prices you report are asking prices not actual sold prices.
We all know that these can be wildly different – especially at the moment. In the USA all comparables are derived from sold prices as this is the only genuine method of using comparisons as a valuation tool. I am searching for a property currently in the Marbella area and I do believe that actual sold prices have fallen significantly but without access to the solid data I have no idea which type of property and which exact locations have been most affected.
In this regard the UK is light-years ahead of Spain in terms of openness – as you probably are aware we have numerous on-line websites which offer irrefutable direct information regarding real sold prices. Can you do the same? I hope so.
Danny Lawrence
Hi Danny – thanks for taking the time to email. Unfortunately the short answer to your question is ‘no’ – the Kyero.com price guides as we have them today are about as good as they get.
There are a few problems that make Spain different to the UK with regard to published sales transaction prices.
The Ministry of Housing in Spain do make statistics freely available. Their figures are based on actual recorded sales which means that they ‘should’ be an accurate reflection of what ‘real’ sales values are. There are four main ‘gotchas’ though.
First, until very recently, a significant portion of the transaction value of many property sales was carried out ‘under the table’ in cash. This was common practice and the offices of public notaries even had a special room where the exchanging of wads of cash could be carried out in privacy. Recent legislation made it the notary’s responsibility to curb this practice but it has been widespread and does still continue. This means that the Ministry’s ‘official’ transaction values are artificially low – more so, the further back in time one looks.
Second, the Ministry make information available only at a provincial level. Take Malaga, for example – a huge province encompassing towns such as Marbella and many small rural villages. An average property price in this province will be virtually meaningless. The ministry do provide a breakdown of towns with more than 25,000 inhabitants – but that represents less than 0.5% of the number of towns and villages within Spain.
Third, the Ministry figures are presented as an average cost per square metre. To be of any value, this relies on the property being measured and recorded accurately in the first instance – again, something that, historically speaking, has not happened consistently. The surface area of a property I purchased 4 years ago in Spain was under-declared by almost 30% by the constructors. Aside from this, I personally find it hard to equate price per square metre to the value of any particular property.
Fourth, Spain has a woeful system of postcodes. Marbella, for example, has a single postcode that covers most of the town – and there are big variations in property prices within the town itself. Unlike the UK where a postcode narrows the area down to a few houses, in Spain a single postcode can cover a few villages. This means that even if the sales transaction data was accurate and available, it would be impossible to get the same level of ‘usefulness’ out of it as in the UK.
For all of these reasons, we started recording and trending ‘asking prices’ a couple of years ago. I believe that the trend is the important thing as is the fact that they’re recalculated and published every month by an independent organisation, Kyero.com. As the market becomes more competitive in Spain, we do see asking prices dropping and I suspect that you would see a reduction in asking prices several months before the correspondingly lower sales prices were recorded and published by the Ministry of Housing – mainly because of the length of the sales process.
The database of Spanish towns we have created also allows us to drill down to any one of the 55,000 towns in Spain. We still have the restrictions imposed by the post code system, of course, but our price guides have a ‘granularity’ potentially 95% better than the Ministry of Housing data.
The Kyero.com price guides, while not perfect, are the best of what’s available at the moment – as soon as more data becomes available or supersedes what we currently have, we’ll publish that instead. Hopefully you see that it’s not a case of withholding information – it simply doesn’t currently exist in Spain in a format that’s useful and reliable.
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