July 4, 2023
How to Calculate The Market Value of Property in UAE?
You may be a property buyer, investor, or seller who wants to calculate the market value of a property in Dubai. It can help you make informed decisions, negotiate better deals, analyze the possible profit, or calculate suitable selling prices.
Fortunately, there are a couple of methods to estimate the approximate worth of a real estate unit.
Here are a few methods that you can use for property valuation in Dubai.
1. Market Approach
The market approach is among the most prevalent methods of calculating the potential value of a property. You first analyze the neighborhood in which your property is located and then find comparable properties which are recently sold or are listed for sale.
Make a list of properties that share the traits of the property you want to calculate the market value for, such as size, location, condition, amenities, and age.
Estimate the value of the property in question by directly comparing it with transactions of similar buildings in the market. It’s a simple and super useful method because you have a lot of recent comparable data available.
If current buyers are paying plenty more money than the actual valuations, chances are the market will soon burst the bubble in the area.
An apartment in a waterfront community in an affluent neighborhood will have a higher worth than a lesser-known house on the city’s outskirts.
2. Income Approach
In the income approach, you derive a property’s value by its income-generating potential. To calculate it, you first need to determine NOI or Net Operating Income, which is the gross income produced by the apartment minus its operating costs.
It involves lease payments, rental income, or any other revenue sources, and the operating expenses include insurance, property taxes, property management fees, and maintenance costs.
Next, you need to determine an apt capitalization rate, which is the percentage that shows the profit someone would expect from the real estate project. Once you have both values, divide the NOI by the capitalization rate.
3. Investment Method
The investment method follows the principle that the worth of a property is calculated from the total rental income it could produce and a capitalization factor depending on the anticipated annual rate of return.
A real estate development that can generate higher rent while service costs are below market average will have a higher market value.
4. Discounted Cashflow Technique
In the DCF or discounted cashflow technique, a property’s worth is determined using a few key aspects which are rental growth rate, rent, expenses, discount rate, and the disposable value when the investment duration ends.
5. Profit Method
The profit approach is mostly used for properties meant for businesses, and their trading potential determines the property’s value. Such a property can be a golf course in a country club or a cinema extension.
6. Cost Approach
The cost approach is normally used for government buildings and places of worship. These are properties that don’t generally sell on the open market, and you can’t find comparable evidence.
Sometimes the cost method is also used to find the market value of recently built or proposed properties. Unlike other valuation approaches on our list, the cost method doesn’t depend on comparable properties and the real estate project’s capability to produce a profit. Rather, it relies on the notion that the price of a property development should equate to the expense of developing a similar property from scratch.
It involves the worth of the land and the costs of construction/site improvements, minus the depreciation expenses of the improvements.
Public properties aren’t sold on the market, and places of worship aren’t rented to tenants. Therefore, the cost method is useful for these two situations.
Property Valuation Calculator
It is an online software application or tool that offers an approximated market value of a property. It is developed to provide users with a fast and easy method to get an estimated valuation without the requirement for an expert appraiser or deep research.
Property valuation tools usually need users to enter specific information about the property, like its size, location, condition, type, and sometimes extra details such as the number of bathrooms or bedrooms.
Some property valuation calculators in Dubai include Bayut, Reidin, Property Monitor, ValuStrat, and Property Finder. These are the property valuation platforms that offer valuation calculators.
When using these online calculators, it’s advisable to understand the process and premises behind their estimations and consider the particular traits and conditions of the real estate development you are valuing.
By following the required steps and using the right valuation approaches, you can get insights into a property’s value. This information empowers customers and helps them in risk mitigation, effective portfolio management, and accurate pricing.
1- How can I request the market value of a property in Dubai?
There are two ways to do that:
Via the service center:
1- Visit a property service trustee center with all the required documents
2- Submit the documents to the front-row employee who will enter your transaction data into the system
3- Pay the charges and get a receipt for the payment
4- You will receive a digital copy of the property valuation certificate via an email
Via Dubia REST:
1- Signup or sign in through the REST app and pick the service
2- Enter the details and attach all the documents
3- Pay the fees
4- Apply digitally
5- You will get an email if the request is approved and receive your electronic property valuation certificate via email.
2- What documents are needed to apply for a market valuation of a property in Dubai?
You can apply at Dubai Land Department with these documents:
- A property valuation request form
- A letter from the landlord and a copy of their Emirates ID Card or valid passport
- A copy of the municipality map or the planning map
3- What payment methods can I use to pay the fees for the real estate valuation certificate?
You can pay in cash, through a credit/debit card, or ePay.
4- How much time it takes for Dubai Land Department to create and send a property valuation certificate?
It can take 1 to 8 working days for DLD to issue a real estate valuation certificate.