Understanding Property Valuation in Dubai: Key Factors and Methods

Knowing the value of the property you’re looking to buy or sell is a critical first step in the process. Fortunately, buyers and sellers in Dubai have a number of avenues they can take to find out the estimated value of real estate, such as:

• Online property valuation tools

• Comparative market analyses (CMAs) provided by licensed brokers
• Appraisals

This blog will break down the key factors that these valuation methods assess to determine a property’s estimated value, and which method does each best.

Location, Location, Location!

“Location, location, location” is the age-old answer to the question, “What are the three most important factors in determining a property’s desirability?” It’s no surprise that things like commute times, access to amenities, and neighborhood culture are all location-specific factors that affect the demand for property. Today, the Dubai real estate market is no different. Location is a major consideration that influences property value across all three property valuation methods.

Winner: Tied. Online tools, CMAs, and appraisers all use location in property valuation.

Size and Characteristics

A property's basic characteristics such as indoor square footage, lot size, the number of bedrooms & bathrooms, and the presence of a garage, pool, or other major amenities have a significant impact on a property’s price. Additionally, properties with a sea view or a view of an iconic building, a staple of the Dubai skyline, can also impact property value.

Online property valuation tools, CMAs, and appraisals all consider size and characteristics factors in valuing real estate. Online tools, however, don’t always provide an option for users to select specific amenities or views, so it’s recommended to request a CMA from a brokerage after you use an online tool if you’re serious about buying or selling.

Winner: CMA and appraisals. Some online tools like Driven Properties’ Instant Property Valuation Tool, do consider amenities and view.

Property Condition and Upkeep

In general, well-maintained properties tend to sell at a higher price than those in need of extensive renovations or repairs. This makes intuitive sense, since a buyer of a property in disrepair would naturally need to shell out cash to make fixes. In this case, the buyer would simply add renovation costs to the purchase price of a home when deciding to make an offer.

But what about a property in average condition with functional, but not spectacular fixtures and appliances? How would this affect the selling price of an apartment, townhouse, or villa? The best online valuation tools on the market allow users to specify the condition of appliances and fixtures, but this type of nuanced assessment is better left to a professional broker or appraiser.

Property condition is a factor in valuation, but no mistake, location and size/characteristics have far more influence on real estate value.

Winner: CMS and appraisals with an honorary mention for those online tools that do consider property conditions.

Economic Factors & Market Conditions

Market trends, supply and demand dynamics, and general economic health of a region affect property valuations in Dubai like anywhere else in the world. When the economy is healthy, as it has been in Dubai and the UAE, real estate prices tend to go up.

Similarly, real estate “market sentiment,” a measure of whether prices are expected to go up or down, can impact sales prices. For example, as we’ve seen in the last few years, the Dubai market has seen sales prices of homes increase significantly. Over this period, the overarching psychology of the market has been that prices will continue to go up. In turn, this has driven sellers to list their properties for more since they expect them to be more valuable in the future. The same sentiment has also influenced buyers to offer more.

All three property valuation methods infer economic conditions by looking at data such as historical sales and current listing prices. This, along with other macroeconomic data such as GDP growth, interest rates, inflation, population trends, and new construction can impact real estate property valuations.

Winner: Tied. Appraisers will likely consider more macro-economic data than other methods, but the impact of such complex factors on home price are often difficult to directly attribute to property values. Further, such data can be inferred within comparable sales and listing prices, which are available using online tools. Since the general public, brokers, and appraisers all have online tool & data access, this is a tie.

In Summary

Whether you’re a seasoned investor or a first-time seller, understanding how each valuation method works can give you a peak behind the curtain as to how they arrive at a property price estimate.