Unlocking the Value: Property Valuation by Vendici

Unlocking the Value: Property Valuation by Vendici

Whether you're looking to buy, sell, or simply understand the strength of your investment, having an accurate property valuation is fundamental. The lack of a publicly accessible transaction register in Portugal – think Righmove in the UK or Zillow in the US – presents a unique challenge. At Vendici Properties, we work diligently to ensure there is quantifiable rationale behind every valuation we undertake. Here, I’ll explore the key points we consider to determine property values in this unique market.

I. Property Characteristics

Assessing the physical characteristics of a property is the first step, as it significantly influences the property's market value and appeal:

• Size and Layout: We consider the built area, plot size, number of bedrooms and bathrooms, basement, garage, swimming pool, and orientation.
• Condition: We assess the state of the property, including the year built, recent renovations, overall condition, and landscaping.
• Environment: The environment the property is located in—resort, urbanization, or independent—affects annual running costs and access to services and facilities.
• Location: Factors like road noise, views, proximity to the beach or clubhouse, and nearby development can impact value.
• Potential: We evaluate the scope for extending, modernizing, or rebuilding the property.

All of these factors can have positive or negative impacts on the achievable sale price and need to be accounted for accordingly.

II. Market Knowledge

Our market knowledge is our biggest asset. Having been involved in numerous transactions over the years, we possess extensive transaction data. Understanding the landscape and distinct characteristics of resorts and urbanizations is crucial. For instance, areas like Vale do Lobo and Quinta do Lago command premium prices due to their luxury amenities and high demand, while urbanizations like Quinta Jacintina or Vale do Garrão fall into different price brackets. Significant price variance can exist between neighboring properties based on condition, orientation, layout, and other factors. Additionally, knowledge of local regulations, upcoming infrastructure projects, and tourism patterns provides insights that impact property desirability and value. At Vendici Properties, our deep-rooted understanding of the local market ensures that property valuations are accurate and reflective of current conditions and future potential, ultimately helping clients make informed investment decisions.

III. Comparative Market Analysis (CMA)

Comparative Market Analysis is a widely used method that estimates a property’s value based on the sales prices of similar properties in the same area. We use a software analysis tool called Casafari, which aggregates all listings within a specified search radius and generates three different price suggestions.

The CMA process includes:

• Selection of Comparables: We analyze recent listings of similar properties in terms of size, condition, location, and features.
• Adjustments: Differences between the property being valued and the comparables are adjusted to reflect their impact on value.
• Shortcomings: The CMA is only as accurate as the data it draws from. The lack of a transactional register means CMA results are based on actively listed property values rather than genuine transactions, and many advertised property prices can be speculative, outdated, or unrealistic.

While the CMA is a useful tool, it is not effective in isolation. We carry out CMA analysis on all valuations and use the results to stimulate our own internal discussions on the final valuation.

IV. Ownership

Ownership structure plays a crucial role in property valuation:

• Private Ownership: Properties owned directly by individuals or entities registered in Portugal, with the owner’s name recorded in the Portuguese property registry.
• Offshore Ownership: Properties owned as single assets in non-trading companies registered overseas.

Each arrangement has implications for property value, largely influenced by the condition of the property and the vendor's circumstances. Most pertinent is the Capital Gains Tax (CGT) liability. For private transactions, the CGT is realized by the vendor at the point of sale, whereas in an offshore situation, the tax liability is latent within the company. Consequently, there might be two prices for one property depending on which ownership structure best suits the property and the parties involved. The complexities of private versus offshore ownership must be examined on a case-by-case basis with guidance from a lawyer and accountant.

V. Vendor’s Expectations

Understanding the vendor's expectations is a crucial component that can significantly influence the valuation process. Vendors often have personal and financial aspirations tied to their property, impacting their perception of its value. They may base their expectations on emotional attachments, the price they initially paid, or investments made in improvements over time. At Vendici Properties, we take great care to balance these expectations with an objective assessment of market conditions, property characteristics, and realistic sale potential. By aligning vendor expectations with market realities, we provide accurate and satisfactory valuations, fostering trust and facilitating smoother transactions.

Accurate property valuation in the Algarve is a multifaceted process that requires a deep understanding of various influencing factors. At Vendici Properties, we pride ourselves on our meticulous approach to assessing property characteristics, leveraging our extensive market knowledge, utilizing sophisticated tools like Comparative Market Analysis and recognizing the importance of vendor’s expectations and circumstances.  Integrating these elements ensures our valuations are not only precise, realistic and reflective of the unique dynamics of the Algarve market.