Property Valuation Methods Explained

 

A property assessment based on location, conditions and multiple other factors is known as property valuation. Several valuation companies in Dubai perform this task by taking notes and photographs and creating a valuation report. There are several methods, including the cost approach, the sales comparison method, and the investment method. The Investment method is a common approach used by real estate investors and is based on a property’s taxable value.

Cost approach

The cost approach to property valuation is one of the three main methods of valuing property. The other two are the market approach and the income approach. Using the cost approach to determine the value of a property will ensure that the valuation is accurate. This approach will also consider the historical and current condition of the property.

Sales comparison method

The sales comparison method is one of the most common approaches in valuing a property. This approach relies on a matrix of significant features and attributes that can be used to compare different properties. The matrix is then used to calculate a property’s market value. This method is often used in commercial real estate and is popular among property appraisers.

Investment method

The Investment method of property valuation is an established way to determine the market value of the real estate. Historically, this method provided reliable and accurate values of real estate. However, it has been shown to have some flaws. For one, it uses estimates from past years rather than current ones. Further, a lack of standard valuation inputs makes it less reliable.

Value per door (VPD)

Value per door (VPD) is a multiplicative approach to property valuation. This method compares the price of a property by the number of doors in the building. It is most useful in multiple-unit scenarios, like an apartment complex. For instance, if a building has 500 apartments, the transaction value would be DH 100k x the number of doors or DH 50 million. However, this method only gives an average value because layouts may vary from unit to unit.

This method is most commonly used for residential properties. However, it can be difficult to use in localized market conditions. This method relies on the expected income a building will generate over the years and the expected decrease in maintenance costs over the next few years.