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Buy-to-Let Investment: The Importance of Valuation

Buy-to-Let Investment: The Importance of Valuation
At Novyy, the process of real estate valuation has our highest recommendation. Property prices are mostly determined by the gap between demand and supply. These prices often do not reflect the underlying value and are merely driven by liquidity in the system or regulatory events.

Why valuation is important for investors?

The simple theory is – prices will keep going up if demand is greater than supply and vice versa. Therefore, price growth is steady in several Scandinavian markets where supply is regulated by lawmakers, or in markets which are landlocked, and the land supply is restrictive in total.
Imagine a property whose price went down by 30-40% within 6 months between mid-2007 and early 2008. Did the property value really change in these 6 months?
We recommend you ask yourself, what is the purpose of valuation? – do you want to hurry up to join the party or make a well informed, professionally researched purchase?
Property markets are cyclical, and each cycle can last between 6 and 10 years depending upon the region. Consumers must try to avoid buying at the peak of a cycle to ensure that they do not end up holding their investment to the peak of the next cycle, sometimes just to break even.
Some global markets are still below the 2007-08 peak – it has been over 13 years since the financial crisis!
Consumers must remember that a valuation exercise costs a few hundred Euros, and it is money well spent when you are investing hundreds of thousands of Euros. Whether you are buying a property for your own use, for buy-to-let or for Golden Visa in Europe, remember to ask for an independent valuation.

Here is an article by José Manuel Morgado, Partner at PVW Tinsa Portugal – one of Europe’s largest valuation firms.

The valuation of real estate assets has been subject to successive legislative changes since 2003. The objective is to make the sector more professional, with increased use of international procedures and regulations aiming to create greater value in this specialized consultancy activity.
In the recent past, a real estate appraisal was often seen as a formal request for a mortgage and not as the elaboration of a specialized report to support a decision.
In English there are 3 designations that do not exist in other languages.

Price, Value and Worth

  1. Price is no more than the asking price - which means, you might have the exact same sized apartment within a few meters distance, or in the same apartment block, priced differently.
  2. Worth is the value perceived in the view of a specific user - this means that while one buyer (with 2 young children) may be willing to pay (say) 500 thousand Euros for an apartment which is in a good school district, another buyer (who is enjoying a retired life) may find the price unsuitable.
  3. Value is the most likely transaction value of an asset on the open market, regardless of the asking price or any specific valuation by a specific user.
Indicating value is the work of a professional specialized consultant. This was the reason to choose PVW TINSA as our brand name.
The valuation of a property asset involves multidisciplinary knowledge of the market, engineering and architecture, urban and procedural legislation, knowledge in the financial and economical areas. It takes time to interconnect these valences in an appraiser's knowhow. A real estate appraisal must rely on acquired knowledge and on databases of relevant dimension of value support.
That is why we are leaders in our activity - because we invest in IT and in the training of our people. The main financial entities, companies and private clients rely on our professionalism in several European countries, Latin America, and Africa.
There are many opinions of value, but they must be sustained and held by those who dedicate their lives to this activity.
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