Empty land poses big challenge to property appraisers

Wide variety of variables complicates the process, including whether the land can be developed, what can be built on it and the long-term value of a potential project.

Empty land may be the most difficult form of property to appraise in Dubai these days, analysts say.

A wide variety of variables complicates the process. The appraiser has first to ask whether the land is developable. Then it has to be determined what can be built on it.

At that point the appraisers must try to determine the long-term value of a potential project, based on a current market that is in limbo. And there is usually very little information available on sales of other land plots in the area.

Jim Drysdale, the director of the Middle East chapter of the Royal Institution of Chartered Surveyors, said: "When there is volatility in the market or a lack of transparency in the market, it's challenging."

Interest in some types of land has all but disappeared in the past 18 months, analysts say. For example, said Richard Paul, an associate director in Dubai for the property consultancy Cluttons, the market for land designated for building labour camps, which was once a thriving business, has dried up.

The value of land for labour housing has depreciated by 90 per cent in some areas, he said.

"The rental demand [for labour accommodations] has just collapsed," Mr Paul said. "If the value of finished stock dropped 90 per cent, then you almost have to be paid to build there."

Ultimately, it is up to the analyst to weigh all the factors and come up with a number. "You can only base it on evidence available," Mr Paul said. "You make the call."

But there was growing interest in land valuations in recent months, he said. In the boom times, some borrowers simply presented lenders with their own studies, which were readily accepted.

"No one carried out normal due diligence or feasibility studies on land, because it was going up daily," Mr Paul said.