Factors That Influence Property Valuations in Dubai

Introduction

When I first started researching the property market in Dubai, I quickly realised how difficult it is to quantify which different factors affect a valuation, and by how much. It wasn’t just the flashy locations or luxurious amenities that mattered; a range of factors, often surprising, influenced the price tags of properties. Understanding these nuances became essential not just for making informed decisions, but for truly mastering the market and creating an automated valuation model (AVM). In this article, I’ll delve into the key factors that influence property values in Dubai, sharing insights drawn from both data and personal experiences.

1. Location, Location, Location?

I used to think that in real estate, location was everything and it is, almost. However, our machine learning models consistently found that, particularly for villas, size often outweighs location in determining value. Of course, location still plays a crucial role. Proximity to landmarks like the Burj Khalifa, ease of access to public transport, and the prestige of neighbourhoods like Palm Jumeirah can significantly impact property values. Nevertheless, from a purely statistical point of view, size seems to be the leading indicator of value. This can be surprising to many because they see a 1-bedroom apartment in Downtown costing an absolute fortune and assume that location is everything. After taking size into consideration, it basically is.

2. Size Matters

The type and size of a property can make a substantial difference in its value. For example, villas generally command a higher price per square foot compared to apartments. There’s also been a noticeable shift in the market, with a growing preference for larger living spaces, particularly in suburban areas. However, as villas become increasingly unaffordable for many, this trend might see some changes. That said, the size of a property and its value are still highly correlated:

3. Quality of Construction and Finishes

One thing I’ve learned is that finishes are highly subjective—and often wrongly assumed to have a big impact on value. In Dubai, where tastes can be, shall we say, "varied", the aesthetics of a property can have a surprisingly inconsistent impact on a property’s value. Quality of building materials and the reputation of the developer are, of course, very important (think of the price premium Emaar buildings fetch). But I’ve seen some truly awful (in my opinion) properties valued far higher than one might initially expect. This may be in part because the cost of labour in Dubai is low, and with it the cost of "re-renovation".

4. Views

Back when I had just finished renovating my apartment, I found it very interesting to watch the valuator while she was appraising it. Despite me reminding her of the Grohe bathroom fittings and newly laid herringbone floor, she only seemed interested in the Marina views from the balconies, taking multiple photos from each. Views can add a hefty premium to property values in Dubai, especially those offering iconic vistas like sea or skyline. Orientation also matters—natural light and privacy are key considerations. A fascinating example is how apartments in the Burj Khalifa, while prestigious, often fell behind other Downtown properties because, as it turns out, people preferred to see the Burj Khalifa rather than live in it!

5. Economy

Market demand is influenced by various factors, including economic conditions, and I’ve seen these shifts firsthand. Supply and demand dynamics, interest rates, oil prices, and geopolitical events can all affect property prices. For example, Covid and Expo 2020 had a noticeable impact, as have more recent events like the Ukraine war and the abolition of the UK non-dom tax system. These factors play a significant role in shaping the property market in Dubai.

6. Amenities and Facilities

When choosing a property, amenities and facilities are significant. The value of nearby schools, shopping centres, parks, and integrated facilities within developments, such as gyms and community centres, cannot be overstated. These amenities add to the overall appeal and value of a property, making them a crucial consideration for buyers and investors alike.

Conclusion

Understanding the factors that influence property valuations in Dubai is key to making informed decisions in this dynamic market. Whether it's the importance of size over location, the impact of finishes, or the value added by a stunning view, each factor plays a crucial role. As the market continues to evolve, staying informed and using tools like YallaValue for accurate and instant property valuations will be more important than ever.