The New Reference Value of Homes for Property Tax Calculations
The New Reference Value of Homes for Property Tax Calculations
In this article, you will learn about the average value of real estate transactions that will determine the tax increase prepared by the government for the coming year.
Starting January 1, 2022, the Spanish Ministry of Finance will use a new reference value for housing when calculating the following taxes: inheritance and gift tax, property transfer tax and documented legal acts (ITP), as well as property tax. In other words, when inheriting, receiving as a gift, or purchasing real estate, the new value will be applied when calculating these taxes.
The reference value is established by the administration and calculated based on prices of recent transactions made in a given area. It is based on 563,309 purchase and sale transactions registered by notaries during the first three quarters of 2021.
Until December, the Cadastre did not publish the reference value for each property, however, the prices on which it is based are already available and can be viewed on a map.
The Cadastre has divided Spanish municipalities into valuation zones, which do not coincide with neighborhoods or districts. These are zones where housing prices are considered comparable; an average value has been calculated for them.
How to Find Out the Prices?
Data has been collected throughout the country, except for the Basque Country and Navarra, which have their own cadastres. The value map published by the Cadastre provides detailed information about Spain’s real estate market. To view the data, you need to close the search tab (since it is not yet active on the Cadastre portal); below appears a map of Spain where you can find out prices by simply zooming in (using the “+” and “-” buttons in the bottom right corner) on areas of interest.
One of the main complaints about the new valuation method is its mass and generalized nature. For example, in Madrid’s Montecarmelo district (in the north of the capital), a price of €3,940 per square meter has been set for calculating the reference value when purchasing or gifting any housing. Thus, in a 10-story building, all apartments are equalized, although in the market the first and last floors cost differently: the price increases with height. Moreover, the assessment does not take into account the characteristics of each apartment: whether renovations were done and what quality of finishes were used.
In the previous example, the price corresponded to an entire district, but in central parts of the capital, the average value can be determined for individual streets or specific intersections. Thus, at the intersection of Alcalá and Serrano streets, the price reaches €9,440 per m² — the maximum in the city.
Going up Serrano street from this square, already the second building on both sides has a different average price, which drops to €7,290. That is, from one entrance to another, the value used by the Ministry of Finance for taxation can differ — and this depends on sales dynamics in that area during the previous year.
Another “hot spot” in terms of prices, according to Cadastre data, is the axis from Plaza de Cibeles to Plaza de Gregorio Marañón, especially on the right side (Salamanca district). This section, including Paseo de Recoletos and part of Paseo de la Castellana, is valued at €8,200 per m², while on the opposite side of the street — €7,850 per m² (closer to Cibeles) and €7,450 per m² (between Plaza de Colón and Gregorio Marañón).
Additionally, in areas with individual construction, the Cadastre’s value map calculates the average price of a typical house. For example, in Madrid’s Puerta del Hierro residential area, the average property value is 2.2 million euros, while in La Moraleja (Alcobendas) — 4.5 million euros.
Data is available not only for large cities, but also for all municipalities. Thus, any of the more than 6,000 residents of the Salamanca town of Peñaranda de Bracamonte can find out the starting price per square meter for taxation. In this town, the average value ranges from €480 to €540 per m².
These Prices Are Just a Starting Point
The prices available for viewing are just the base on which the Cadastre will calculate the final reference value. A corrective coefficient is applied to them in accordance with current cadastral rules (taking into account, in particular, the age of the property) and a reducing coefficient of 0.9, which means a 10% discount.
The purpose of this discount is to keep the reference value below the market price. However, experts warn: with such an insignificant discount, it often will not fulfill its task, and the reference value may turn out to be higher than the real one. In other words, cases are possible where a person buys housing for €150,000, but the municipality declares that it is worth €200,000, and tax will have to be paid based on the latter amount.