The significance of property valuation

The significance of property valuationImage Credit: Supplied

If there is one kind of property that never goes out of fashion, it is commercial property. Whether it is in Dubai, Abu Dhabi, London or New York, it draws a lot of attention all over the world. However, one task that appears a little cumbersome for many is determining its value. Property valuers, who are chartered surveyors themselves, employ various methods to evaluate a property.

The annual net operating income of a commercial property is a key parameter in finding its value. Each additional dirham earned from the property is likely to increase its valuation considerably. It can depend on its location, the rent earned or the amount saved due to efficient management.

The cost approach is another method whereby building or landscaping improvements are taken into consideration to determine value. The gross rent multiplier engages a mathematical calculation to find out the exact value of a property. It takes into account the yearly gross rental income multiplied by the number of years the buyer would take to repay the property cost. However, the value of empty office space is slightly hard to find out with this method because finding new tenants may take some time and until that is accomplished, it will hardly generate any income. In today’s age, anybody dealing with property, either as a buyer or as a seller, must keep these basics in mind before renting or selling his property or availing of bank financing.

While learning to calculate on your own can be great, a professional can be quite handy in this case. And while a real estate broker or a property consultant can give you a fair idea about the current market rate of a property in a particular area from which you can compare and set a valuation, this method may not always be accurate. Thus, it always helps to hire a professional property valuer.


Handy Hints

• Always hire a property valuer to determine the value of a property

• Property brokers can only give market guides not proper valuation

• Gross rent multiplier is one of property valuation methods used


Source: Shabnam Mondal, Special to Properties

The writer is a freelancer

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