Local factors important in accurate valuations

Building valuations are required for a multitude of reasons including mortgage security, purchase or sale advice, partnerships, accounts and balance sheets, stock market floatations, raising finance and for matrimonial and other disputes. Most of the established valuation methods are relevant to all markets, but it is important to engage an experienced valuer who fully understands local factors. Comparables The most common valuation method is direct capital or rental comparison, where after inspecting the property, the valuer looks at details of other sales or lettings which are comparable to the subject premises. Floor areas The method of measuring the floor area can produce discrepancies since there is no standard method. This is called the efficiency ratio. Some developers include balconies, passageways, staircases and lift shafts, garages and patios in their calculations of built up area (BUA). Special factors When the valuer has established the valuation ‘tone' of the area in terms of dirhams per square foot or metre, he needs to refine his valuation to take into account special factors which may apply to the comparables or the subject property such as amenities, view, finish, car parking provision and proximity to the metro, the service charge and the quality of maintenance. Measurement To achieve like-for-like valuations, it is standard practice in the UAE for the valuer to adopt the developer's floor area figures as shown on the title deed. This is particularly the case when the property is a standard type and there are plenty of comparable transactions. Repair The state of repair will become increasingly important as the building stock ages. In most markets, buyers would not commit to a purchase without first having commissioned a detailed condition survey. Results are often used to renegotiate the price, on account of essential repairs. Sites The normal method in valuing development sites is to carry out a residual valuation, where the gross development value of the permitted development is estimated and all the costs associated with the construction, fees and finance and developer's profit are deducted, leaving a value available for the land, or the part completed project. Where the land has not been handed over and a building permit has not been granted, there are numerous issues which can affect the development and therefore the land value. Delayed completion The actual delivery date may be greatly delayed, which means that another building which is nearing completion may attract a premium. If this is used as a comparable, an adjustment should be made to the unit value. If the property is bought for investment, clearly a delay in handover will affect the investor's return. Masterplan changes Changes to the master plan by the master-developer or by the Road Transport Authority can change the plot boundaries and necessitate a complete redesign, which impacts the value. In some instances master developments were designed on the basis that district cooling for air-conditioning would be available, but the facility was later deleted, leaving each plot with a barely adequate electrical load provision, which called for a re-design. In a static market, the valuer has to ensure they have assessed all the relevant factors.