Understanding the difference between cadastral value and market value is a fundamental part of investing in real estate. These values are two property valuation tools that will help us make informed and confident investment decisions.
What is the cadastral value?
The cadastral value is the price attributed to the property for calculating the Real Estate Tax to be paid. It is set by the local authorities and is usually significantly lower than the market price.
What is the market value?
The market value of a property is the price at which a buyer and seller would agree to trade it between them. This value is based on the supply and demand at any given time. For example, if a house is for sale in the area for €500,000 and there are many people interested in buying it, the market value of that property may be even higher than that.
Differences and aspects to take into account
Although market value and cadastral value refer to the same property, they have significant differences. The market value is directly associated with supply and demand, a set price, which can vary according to the market. On the other hand, the cadastral value is a fixed value, established by the authorities for the calculation of the corresponding taxes.
The difference between the two is also important when it comes to investing. Selling above the cadastral value is completely legal, but in the case of doing so, it will have repercussions on the payment of some taxes:
The municipal capital gains tax: The seller is obliged to pay it, when selling above the cadastral value.
The IRPF: It must be declared in case of loss or capital gain.
In conclusion, the cadastral value and the market value are two different tools that allow the property to be analysed from two perspectives. It is essential that both buyers and investors know the difference between these two values before making an investment decision.