Real Estate in Sharjah has changed very quickly recently. Properties in a particular community have different price levels. In some cases, two units in the same building may be priced differently regardless of the fact that they are both the same square footage and have the same layout. A Spread Analyzer is a valuable tool for understanding how certain localized aspects of a property impact pricing and demand for other properties in the same development.
A Spread Analyzer examines micro-locations as it relates to certain characteristics such as being corner located (or having windows), having views into a park, being close to a major roadway, or having views that cannot be obstructed by other buildings. Rather than averaging what the total number of homes in a neighborhood sell for, the “spread analyzer” provides an analysis of how each unique characteristic impacts value.
For example, a residential project in Aljada may find that units with views of internal garden areas or outdoor space will generally cost more than units with views of parking lots or service roads. The spread analyzer clearly demonstrates the differential pricing based upon these type of locations. The “spread analyzer” also demonstrates to developers and buyers, the premium that consumers are willing to pay for better views, less noise from traffic, and/or greater privacy.
Understanding Price Variations Within the Same Community
One of the biggest misunderstandings about residential property (specifically) is that only one thing, the location, determines value. Although the location still has considerable influence on your investment, “micro-location” has equal importance. For example, within the exact same new construction project, you will find that some unit types (due to many characteristics that are very easily overlooked) result in large differences in price.
Corner units generally command a premium compared to others due to their greater exposure to natural light and improved ventilation. Corner units also appeal to families who have children; therefore, demand for them is greater. The spread analyzer shows how much of a premium corner units receive over other unit types based upon comparable sales data.
Units that face parks are another example. Units located in developments such as Maryam Island, that provide buyers with views of either landscaped areas or a waterfront promenade, consistently sell for a higher amount than those without views. Buyers do not buy homes simply to live there, but rather invest in a quality of life. The spread analyzer measures the difference in buyer’s willingness-to-pay for each type of unit by showing consistent spreads when viewing and non-viewing units are compared.
Road-facing units, however, may experience less demand from potential buyers since they have increased levels of street noise and decreased privacy. Road-facing units can generate rental income if properly priced relative to market conditions. Investors can use the spread analyzer to discover potential investments where lower entry costs could equate to larger cash flows in terms of rent yield.
Identifying Hidden Opportunities Through Micro-Location Analysis
The true benefit of the Spread Analyzer is it enables investors to identify investment opportunities that they would have never thought possible. Most Buyers are concerned with “headline” prices and do not take into consideration the impact that Micro Location has upon Long-Term Value.
A great example of this is when a buyer purchases an apartment in a project at a slight discount to another unit in the same project because that unit faces a Secondary Road versus a Premium Park Facing Apartment. Although the Rental Income from the unit facing the secondary road will be less than the Premium Unit (which could potentially mean a larger Discount), the difference in Purchase Price could make up for that income shortfall over time. The Spread Analyzer gives Investors a way to clearly see which type of trade-off will provide them with the best opportunity to maximize their investment.
Tilal City Villa Plots located close to Community Parks or Schools tend to exhibit greater Price Appreciation. Families are attracted to these locations as they provide Convenience & Accessibility. Through analysis of these trends, Investors can locate themselves in areas where Future Demand will be High.
Finally, Buildings that have Mixed Orientations, such as one Tower having Units that face different directions, but all are priced at a Tiered Pricing System. The Spread Analyzer will break-down these Tiers so that Buyers can easily compare the Value within the Same Project. This feature of the Spread Analyzer provides First-Time Buyers an opportunity to Maximize Returns while Not Over-Paying.
How Developers and Investors Use Spread Data
Developers rely upon micro-location data to create pricing models. Micro-location data allows developers to determine what features will result in premium prices so that those particular features can be marketed at the time of launch.
The spread analyst functions as an investment tool. It permits investors to evaluate different comparable units in order to find areas of value gap; instead of being forced to depend solely on general market trends, the investor can use the analysis to base his or her investment decisions on specific characteristics of the individual properties.
This type of investment strategy is especially important in a highly competitive real estate marketplace. In a highly competitive marketplace, buyers have many options for purchasing a single-family home or condominium. As such, the buyer has no reason to purchase one property over another unless he or she has a basis for making that choice. The spread analyst creates this basis for comparison by converting qualitative characteristics of each home into quantitative price differences (premium).
The ability to determine micro-location premiums will assist investors in planning the sale of their properties. An investor who understands how micro-location premiums impact the price of a property can strategically position the property in order to attract potential buyers. If an investor knows that his/her property possesses a number of characteristics that provide a significant micro-location advantage compared to other similar properties, then that property is more likely to appeal to potential buyers and ultimately receive a higher sale price than would otherwise be possible.
The Role of Data in Sharjah’s Evolving Property Market
Sharjah continues to grow, through expanding its planned communities, developing mixed-use projects, and improving infrastructure. The increased growth in the market has created the need for data-driven decisions. Investors can make informed choices about investing using tools that include the spread analyzer.
This movement towards more analytical assessments represents a larger shift within the evaluation process of evaluating real estate. The buyers will no longer rely on general trends, or an agent’s opinion, but instead they are looking at specific details related to each individual property and how those specifics relate to their performance.
The spread analyzer provides the buyer with more insight into the valuation of a home; providing them with additional information regarding the relationship between the price paid for the home (the value) and characteristics of the home including, but not limited to views, distance from the city center, and other positive attributes of the homes’ floor plan. This is beneficial to both short term investors who are buying to sell quickly after purchasing and to long-term owners of residential and commercial property.
Market Intelligence from the Experts
Sharjah’s real estate is analyzed by Keyspace Realty and Keyspace Dubai through an analysis of detailed data backed information from many levels including, but not limited to, micro-locations, unit level performances, and transactional patterns in order to identify which characteristics of each home contribute to its overall value. The use of the Spread Analyzer allows us to also identify the premium that buyers are willing to pay for certain features such as corner units, park facing homes etc. In addition, Everything Sharjah will provide localized updates regarding all aspects of community development, infrastructure changes, and enhancements to lifestyle within each community; factors that have a direct impact on the preferences of buyers. Ultimately, by providing both sets of information, we can assist our investor clients in better understanding what the Spread Analyzer represents in terms of real demand and ultimately make wiser decisions when selecting properties.
Turning Micro-Location Insights Into Smarter Investments
A buyer’s ability to see past the average is where the real power of the Spread Analyzer comes to life as it pertains to real-world investment decision making.
Investors are able to take the same two similarly priced units and apply the spread analyzer to find out which one has the most potential for the long term. A premium facing unit with a slight increase in upfront costs could create an advantage in resale. On the other hand, a lower price point for a unit in less desirable location could produce larger rental returns due to increased affordability.
The data-driven aspect of the spread analyzer removes some of the guesswork from determining which unit will be best performing. Investors are no longer left questioning their decision; instead they have the benefit of knowing how the actual market has behaved.
In addition to providing an alternative method of pricing for investors looking to make educated investment choices, as Sharjah’s property market continues to evolve and grow, these types of analytical tools will become much more valuable.
Frequently Asked Questions
What is a spread analyzer in real estate?
A spread analyzer is a tool used to measure how much of a difference there is in price for very similar homes due to micro-location issues, such as the view from your window, if you live near a school or park versus a industrial area, etc.
Why do micro-locations affect property prices?
Buyers have their own preferences, and some prefer certain things (like a park view) and others prefer other things. When buyers see what they want and/or don’t want in an investment, then they will make offers on those items, thus affecting supply and demand. In turn, their offers will also affect the price of a home.
Can the spread analyzer help with rental investments?
Yes. This can give you insight into purchasing the most affordable unit(s), while still generating enough cash flow to offset mortgage payments and improve overall yields.
Is this tool only useful in Sharjah?
No. A spread analyzer could be applied to any market. However, it would be more relevant to growing markets; because in growing markets the price differences between similar units are larger.
How often should investors review spread data?
Investors should continually update their knowledge of spreads. For example, after a developer introduces a new community, or a major infrastructure project opens, spreads in that location may change.
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