All you need to know about a property’s market value
The value of an asset is determined by the price a buyer is willing to pay and a seller is willing to sell for. The true meaning of market value as defined by the Royal Institution of Chartered Surveyors (the governing body that regulates all valuation surveyors) is:
‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’
There can be differences between what the property is worth (market value) and the cost to buy it (price). The price paid may not represent the properties true market value. This is due to the listed property price simply reflecting what the seller is aiming to achieve and is not considered the actual market value. Only after negotiations between the buyer and the seller, the property is sold at a price that both parties agree on and can then be considered market evidence. This is providing the sale was made knowledgeably with no premiums, no hope value and no other reason the buyer may specifically want the property.
what affects the value?
The value of a property can be affected by many factors including:
Location — proximity to schools, shops, malls, close to sea and major roads. Immediate location of the plot within a cluster of plots.
View — a desirable view such as sea or marina views would add value to the property while a road or construction view would hinder the value.
Age — older properties deteriorate over time and so does their value. Newer properties also tend to have newer features such as central AC, electric gates, pools, etc., which would add value.
Size — the size of the plot and the built-up area of the property affects the value greatly.
Use — the use of the property determines the level of income and demand for the property. Specification and additional features — examples include pool, gym, central AC, large open areas, marble flooring, kitchen and bathroom upgrades and other additions that add to the desirability of the property.
How to increase the value?
As a villa owner, the most effective way to increase the value of your property is to extend the property, hence increasing the size of the built-up area. However, you should also be mindful in that the cost to extend the villa may vary due to the value it will add. The cost of construction will be considered when carrying out a valuation yet ultimately the value rate applied will be based on the market at the time of valuation.
The most common way of adding value to a property is through renovations including: > Fixtures and fitting > Change of flooring > New bathrooms > New kitchen > Swimming pool > Landscaping
There are some renovations that may not increase the value of the property and could affect the final valuation. This includes furnishing and designing heavily on personal taste such as gold taps or extravagant ceiling upgrades. Due to Dubai’s melting pot of nationalities, investors and home buyers come from all over the world and tastes vary significantly. Keeping the design simple will not limit the group of potential buyers, thus maintaining the true market value. The writer is partner and head of residential valuation at Cavendish Maxwell. Views expressed are her own and do not reflect the newspaper’s policy.