Property Valuation

A property valuation can be needed for a variety of reasons by different people and can play an important role in getting loan security, financial reporting, or internal use. The importance of these valuations makes it no surprise that individuals and companies alike would want to know how much it will cost before proceeding with a particular company. With that being said, that no valuation is the same, with many variables involved in the process. As such, it is rare for a valuer to have a set or standard price for a property valuation. So whilst answering the question ‘How much does it cost for a property valuation in Dubai?’, it would be much more efficient to understand the different factors that affect the price. We have broken down some of the key factors that impact the cost of a valuation, and what can make it more or less expensive.  Purpose of the valuation  There are many different reasons why a person may need a valuation and as such the prices for valuation. One common reason is for loan security. Lenders or banks will often necessitate an independent valuation to take place so they can determine how much they are willing to lend. Companies or individuals may need independent advice to determine the value of the assets they hold. Otherwise, corporations and businesses will need to conduct quarterly or annual valuations for financial reporting and accounting. Whilst these are all valuations, their purposes differ, and as such, so does the liability, therefore the prices of the valuation will most likely vary.  Time and Effort Some valuations take more time than others, depending on the complexity and the scale of the project. Take for example a drive by inspection for a single office, which will be priced differently from a total inspection of a full tower or commercial complex. The more effort, and the more complex the valuation, the more time it will take, and subsequently, the more expensive the valuation will be. As a general rule, smaller residential properties will be considerably less expensive than larger commercial properties.  Inspection Types There are several different inspection types that can be performed, depending on the needs and requirements of the client, as well as the specifications of the property in question.  One inspection type is a desktop investigation, this involves an investigation into the property and its surroundings which are all done from the valuer’s computer at their office. All of the relevant documents should be provided to complete the valuation accurately. A client may opt for this if the client has had a full valuation report completed previously, and all that is needed is a re-evaluation of the property.  Next, there is a drive-by inspection. If access into the property is not permitted a client may opt for this type of inspection. This involves a full external inspection, wherein only the outside of the property is looked at. Following this, a partial inspection may be completed. This type of inspection would arise if the valuer has restricted access to the property and they are only allowed to access certain parts of the unit. Finally comes a full visual inspection, which will involve an internal, external visual inspection. This is the most comprehensive inspection type that will give the most detailed property valuation report. Depending on the type of inspection, the price may vary, with full property inspections tending to be more expensive than drive-by or desktop valuations. With that being said, a full inspection would tend to be the best type to do whenever possible. Valuation methodology  There are various methods that are employed when doing a property valuation, and deciding which are used is generally dependent on asset type.  The most commonly used methods are comparable, investment, and the profit method. The investment method is typically used for more complex investment type properties, whereas the comparable method is the most commonly used when there is a good availability of transactional evidence. As one can see, there are a lot of different factors to take into account when factoring in the price of a property valuation, with the purpose, amount of time, the inspection type, and the methodology all playing a part in the final cost. To get an accurate quotation of how much a valuation of your property will cost, the best course of action would be to book a meeting with a chartered surveyor and/or a qualified valuation expert. They would be able to sit down with you and discuss your special requirements, as well as find out more information about the type of property that needs to be valued. After a thorough preliminary analysis has taken place, the valuer will be able to give you a quote.  If you require a valuation for your property, our valuation team is fully qualified and RICS certified, so will be able to deliver a high quality and comprehensive report that is designed with your specific needs and requirements in mind. For more information, book a consultation with one of our team. 

What is a property valuation?  A property valuation, simply put, is an assessment of a property’s value that looks at a range of factors, taking into account typical characteristics like size, layout, specification, condition, views. However, it will generally exclude non-permanent property features such as furniture, and the result will be in the form of a detailed report of a property’s market value.  It is important to note that value does not always equate to cost or price in a valuation.   Price is the actual amount that a person will pay for something. Cost refers to the actual money that has been spent on a property, including upgrades, renovations, improvements and labour costs to build the property. Whilst these are factors that can influence value, they are not determinants of value.  As such, the final sale price is usually different from what is stated in the valuation report.  What is the valuation process? A valuation is typically undertaken by a valuer/surveyor and is overseen by senior staff who are qualified to do so. The valuer carries out the valuation on behalf of their company. Valuers must be independent, objective and transparent in their approach.  In Dubai, there is local regulation to become a registered valuer, similarly to the RICS, issued by the Dubai Land Department.  The first stage in a valuation would involve a due diligence check that would include a conflict of interest check and initial analysis of the preliminary information received. After this is completed, there would be a property inspection, with notes taken on the condition of the building, any upgrades, location and any other relevant information that would affect the property value.  Further research would need to be conducted, looking at recent real estate transactions in the property’s vicinity and in-depth market analysis. A key to determining this would be using different data platforms and sources, including land department data, internal and external databases, and conferring with reputable real estate brokers.  Once detailed research has been completed, an in-depth report would be written up with a quality assurance check carried out by a senior supervisor that is RICS certified, ensuring the report is held to the highest standards.  Why are valuations necessary? One of the more common uses for a property valuation is because a bank or money lender requests one. These valuations would then be used to determine a mortgage, the risk of an asset and how much the lender is willing to give to the property owner. However, these are not the only purpose of a valuation. They are also necessary for audits and end-of-year reporting for tax and corporate purposes, as well as to help negotiate a property deal.  As such, there are many people who might want to have a valuation done on their property, such as property developers, property owners, and investors. If you require a valuation to be undertaken on your property or portfolio, contact us today to book a meeting with one of our RICS certified valuers. 

When securing a mortgage for a property, the bank will require a valuation to be carried out, where an independent valuation firm is appointed to assess their opinion of Market Value (MV). What may come as a surprise to potential buyers, is the valuation figure they expected maybe in disparity with the valuation done by the bank’s appointed surveyors. What is Market Value? The first thing to understand is what Market Value (MV) means. Essentially, it is the agreed-upon price between the buyer and the seller determined through demand, supply, and the current market conditions, or rather the price at which the property is being sold at a particular time. MV also assumes that the property has been properly marketed.  With that being said, when determining MV, there is sometimes an element of emotion that affects the price. A buyer may fall in love with a property and will therefore be prepared to pay a higher price. A buyer may also get tired of trying to find the ‘perfect‘ property at their budget, so will compromise and increase the budget. Alternatively, a distressed seller may get worried if their property is not selling, and will reduce the price.  As such, these personal, human elements can have an effect on the actual purchase price. How do ‘market valuations’ differ from ‘bank valuations’? While market value can be affected by emotion, bank valuations, on the other hand, are purely concerned with numbers. A person will usually get a bank valuation when they are looking to get equity from their property or to secure a mortgage for a house they want to buy. A key difference between market and bank valuations is that market value tends to be higher than a bank’s value. The bank has to ensure that the mortgage does not exceed the value of the property, as it will serve as collateral if you are unable to make the loan repayments. Their main goal in valuing the property is to determine how much they can recoup if an individual were to default on their mortgage payments and the property needs to be repossessed in distressed circumstances. If the situation arises, the bank may be forced to sell below market value in order to avoid accruing interest over a long period of time.  Generally speaking, bank valuations tend to be on the lower end of the pricing spectrum.  A ‘market valuation’ you receive from a broker is simply their opinion of value based on experience. A valuation from a bank is typically undertaken by an independent valuation company that provides a valuation report, which includes Market Value (MV) based on reliable evidence. A person will usually use a bank valuation when they are seeking to release equity from a property or to secure a mortgage for a property. The bank ensures that the mortgage does not exceed the value of the property, as it will serve as collateral if the borrower is unable to make the loan repayments. If the situation arises that the bank is forced to repossess the property, they will likely attempt to sell the property to recoup the loan.  You may require a bank valuation to secure a mortgage or release equity in a property. In this instance, an independent valuation is carried out to ensure the amount to be borrowed is within the bank’s loan-to-value risk appetite. A deposit will be required from the buyer and combined with the mortgage should cover the purchase price. The loan-to-value ratio is capped by the Central Bank and will differ depending on various factors including property type, the value of the property, and if the property is an investment or to be lived in. It is important to remember that a bank is typically risk-averse. Can anything be done to improve a bank valuation? The process of releasing equity or gaining a mortgage that works for the borrower can be frustrating. Borrowers may have to pay a higher deposit than originally thought. That withstanding, there are some things a homeowner can do to improve the value of their property.  First impressions matter, so make sure your property is clean and tidy. Give your property a minor face-lift with some cosmetic updates. This might include a new lick of paint on the walls, a bit of landscaping and fixing any minor repairs. You should also make sure that all unfinished renovations are completed before a surveyor visits. Should you wish to upgrade your property, the kitchen and bathrooms, generally speaking, add the most value internally. Further to this, a private swimming pool, patio and/or a well-landscaped garden is always better than a sandpit. It’s important to note that cost does not necessarily equal value as everyone has different tastes and preferences. Also, note that furniture is not included in a typical mortgage valuation. One step further would be to highlight the benefits of a property when compared to similar properties in the neighborhood. A list of any upgrades, renovations, and maintenance not easily seen can help the valuer build a better picture. Also, it’s worth highlighting the community/building facilities and amenities.  If you are the type to leave nothing to chance, you can also do your own research on the community and get the details of any recent, comparable transactions in the area to support the valuation. You should approach your role in the valuation as helping the valuer see the benefits of the property. If you are looking for an independent and impartial valuation on a property, book a consultation with one of our Chartered Surveyors. 

There are currently many available commercial options on the market, but how can you make your property stand out from the rest? We have provided some industry tips which can improve your asset and make it more attractive to potential investors. MAINTENANCE Ensure your property is well maintained. The asset should be visually appealing, with a well-maintained interior and exterior. Those first impressions can be critical even when it comes to securing a viewing. Minor improvements such as painting and deep cleaning can be very effective with small capital expenditures. SUSTAINABLE IMPROVEMENTS   Making environmentally conciseness improvements can increase the value of the property by reducing operational costs. The changes can be as simple as insulating the property and switching to efficient light bulbs. Many governing bodies will also provide grants to help with larger capital outlays such as solar panels. If you are looking to attract large companies, keep in mind that many have corporate social responsibilities, and will only occupy energy approved assets.  KNOW THE MARKET   Research the market and find asking and sale prices of similar assets. This will give you an advantage in the sale negotiation stages. If you’re looking for a quick sale, ensure the property is listed at the market asking price. Many investors will use a property search engine and filter the price ranges if the asking price is too high; your asset will not appear within the search. KNOW YOUR PROPERTY If you own a commercial building be aware of what type of tenants will be able to occupy your building, for example, which license they hold and if their business operation is approved. Gain as many government approvals as possible in order to accommodate as many tenants as possible. HIGH OCCUPANCY RATE Having a high occupancy rate will make your property more attractive to an investor. This can be achieved through leasing units at the current market rate, securing tenants with good covenant strengths, longer lease terms, good unit mixes and effectively using the available sq.ft area. EXPERIENCED BROKER   Use an experienced brokerage that will give your property the exposure to the market that is deserved. A good real estate company will have a database of potential investors and will also have a planned marketing strategy tailored to your requirements.

Why We Value Commercial Property?  Why We Value Commercial Property?  Within the UAE we assume that property valuations are typically used for financial institutions, where an estimated amount of debt is placed against the property for a mortgage in order to calculate a loan to value ratio. Although this is one of the most common purposes of valuation, there are multiple other reasons, whether looking to audit, invest, occupy or dispose it is important to understand the valuation process to determine that the correct market value/market rent for an asset is reported, paid or received.     Acquisition / Disposal   Investors within the market look to make future returns whether this is through capital gains or a rental return, it is important to have a strategy of market entry and exit to analyse potential market trends and forecasting cash flows. Typically for end-users/owner-occupiers, the main reason for purchasing property is to avoid rent and to pay off the property’s mortgage. By undertaking a valuation, an informed decision can be made for both scenarios which can ultimately determine a successful or unsuccessful investment. Auditing & Accounting Property valuations for auditing purposes are usually undertaken on a year-end basis and are required to provide advice on the appropriate values to include within financial statements. An individual or firm would request for the basis of value to be undertaken to “Fair Value” which is compliant with International Financial Reporting Standards (IFRS). Another common basis of value includes, Market Value and Market Rent which are internationally recognised and have a long-established definition, this can be found within the RICS Valuation – Global Standards. (Redbook Global Standards – 31 January 2020) Feasibilities / Development Appraisals  A feasibility study is a process for determining the viability of a proposed initiative or development. The study will analyse a series of calculations to establish value, profitability, and suitability of the proposed development based on a client’s required inputs. These variables/inputs can be changed accordingly e.g. different rents, uses, yields or financial contributions. Understanding How to Value Your Commercial Property? There is a common misconception that property is simply valued by adding the land value and build cost together to determine the market value. Although this cost approach is one way of valuing commercial property there is much more depth in using this method which only just scratches the overall valuation surface. There are 5 recognized valuation methods that are set out within the RICS Valuation – Global Standards. (Redbook Global Standards – 31 January 2020) which are highlighted below. Different Valuation Approaches/Methods?  1. Comparable Method The Direct Comparison Approach method provides the market value of a property by “comparing” it to values obtained in the open market of similar properties. This approach looks at AED rates per sq.ft of the lettable and built-up areas. This could be considered as the key method, as each of the remaining approaches require some form of comparable analysis to function. The direct comparable approach is more effective on properties with fewer elements, for example, single/individual office units. 2. Income Approach Income capitalisation is a valuation method estimating the value of an income-producing asset. This method of valuation relates value to the market rent that a property can be expected to produce. The net market income is capitalised at a market-driven capitalisation rate which considers all the property’s aspects. This method would be used to value properties such as full buildings of all asset classes, industrial complexes. 3. Discounted Replacement Cost (Construction + Land)  The ‘DRC” method takes into consideration the current cost of replacing an asset with its modern equivalent, fewer deductions for physical deterioration and all relevant forms of obsolescence and optimisation. This is not a market-based valuation approach and is considered relevant to specialised properties. (i.e properties that are rarely, if ever sold on the open market due to their uniqueness, which arises from their specialised nature, design, configuration, size, location or otherwise). 4. Residual Method   A residual valuation is a form of a development appraisal and is commonly used for land sites, where a development is proposed based on plots approvals and permissions. The approach takes into account the gross development value derived on a direct comparison or income method and then minus costs such as- Construction, Infrastructure & Landscaping Costs Professional Fees Cost of Finance Contingency Costs Marketing and Legal (Sale/Letting) Developer’s Profit Other Costs (Planning/Purchasers costs) After all these costs have been subtracted from the Gross Development Value the net result is the residual value of the plot.  5. Profits Method    The profits method is used for valuing specialist trading properties, where the value of the property depends on the profitability of the business. The method is used for valuing properties such as hotels, petrol stations, etc.  Simple Methodology for Profits Method  Annual Turnover minus cost and purchases = Gross Profit Gross Profit minus working expenses = Net Profit (FMT – Fair Maintainable Trade) Net Profit minus tenant’s remuneration = Adjusted Net Profit (EBITDA Earnings before Interest, Taxation, Depreciation, and Amortisation Adjusted Net Profit is then capitalised at an appropriate yield to give Market Value Using The Five Methods Ideally, a minimum of two methods should be used when valuing a property, one as the primary method and the second as a cross-reference, it is important to ensure that the method is appropriate for the purpose of valuation. All methods will take into account the properties characteristics/features such as location, specification, condition, size of the property, types of lease contracts in place, etc. Applied rates will be adjusted accordingly based on these elements. CRC Valuations  CRC Valuations use all the above methods to a more in-depth basis,the team possesses the experience and knowledge to value all property types. Our valuers have the necessary skills and qualifications to undertake valuations to the mentioned international industry standards. CRC Valuations provides all the mentioned valuation services throughout the UAE that are all in accordance with RICS, IVS and RERA practices and guidelines for the following: Secured lendingAuditing and AccountingAcquisition and DisposalFeasibilities/Highest best useInternal decision-making purposes. Our brokerage and property management departments have been active within the market for over 30 years. Fundamental information provided by our established services lines feeds through to ensure our valuations are market-facing. 30 years of presence has allowed us to build an extensive database of property transactions. If you would like more information on valuation and our services, please visit CRC Valuations.