Valuation & Investment
36 terms in this category
Absorption Rate
Absorption rate is the pace at which the market takes up properties available for sale or lease over a given period, showing how quickly new or existing supply is being sold or rented.
Amenities
Amenities are the services and facilities, both around a property and within it, that make it more attractive to buyers and tenants and support its rent and value.
Appraisal
An appraisal is a written, documented opinion of a property's value at a specific date, prepared by an accredited valuer for a defined purpose such as sale, mortgage, insurance or litigation, and delivered in a report that sets out the scope of work, methods, assumptions and concluded value.
Buy and Hold
Buy and hold is a long-term real estate investment strategy in which a property is bought and kept for many years to earn steady rental income and benefit from gradual appreciation, while minimising repeated purchase and sale costs.
Capitalization Rate (Cap Rate)
The capitalisation rate (cap rate) is the ratio of a property's annual net operating income to its value or purchase price, used to convert income into value and to compare returns on income-producing property; a property with SAR 800,000 net income and SAR 10,000,000 value has an 8% cap rate.
Certified Appraiser
An accredited (certified) valuer is a natural or legal person licensed by the Saudi Authority for Accredited Valuers (TAQEEM) to practise valuation in a specific sector such as real estate and entered in the valuers' register; only such a valuer may issue signed valuation reports that carry weight.
Comparative Market Analysis
A comparative market analysis (CMA) is a study that compares a subject property with similar properties recently sold or leased in the same area, adjusting for differences in size, location, age and specification, to arrive at a realistic price range for selling, buying or renting.
Cost Approach
The cost approach estimates a property's value by adding land value to the current cost of constructing an equivalent building, less physical, functional and economic depreciation, on the principle that a buyer will not pay more than the cost of an equivalent substitute.
Diversification
Diversification is spreading capital across real estate assets that differ in type, location, tenants, lease terms and investment vehicle, so that a decline in one asset or sector does not cause a large loss across the whole portfolio.
Down Payment
A down payment is the part of a property’s price that the buyer pays from their own funds at purchase, with the rest financed by a real estate financier; it equals the property value minus the financing amount.
Equity
Equity in a property is the portion of its market value that actually belongs to the owner after deducting the outstanding financing balance and any other debts secured on it, calculated as: current market value − outstanding financing balance.
Flipping
Flipping is a short-term investment strategy in which a property is bought below its value, often because it needs renovation or the seller must sell quickly, then improved or remarketed and sold within months for a capital gain.
Income Approach
The income approach is one of the three valuation approaches; it estimates a property's value by converting its expected future income, such as rent net of expenses, into a single present value, either by capitalising a representative year's income or by discounting projected cash flows.
Infrastructure
Infrastructure is the basic networks and facilities that serve land and buildings — roads and bridges, water, sewage and storm-water drainage networks, electricity and telecommunications, and public transport.
Investment Property
Investment property is property (land, a building or part of either) held to earn rental income, capital appreciation or both, rather than for the owner's own use in operations or for sale in the ordinary course of business.
Land Investment
Land investment is buying raw or subdivided land and holding or developing it to earn a return from its appreciation as the city expands and services arrive, or from developing it and then selling or leasing it.
Liquidity
Real estate liquidity is how easily and quickly a property can be turned into cash at a price close to its fair market value without a large discount.
Location Analysis
Location analysis is the systematic study of the spatial factors around a property — accessibility, proximity to roads and services, neighbouring land uses and the permitted building regulations — to estimate how they affect its value, income and ability to sell or lease.
Market Analysis
Real estate market analysis is a systematic study of supply, demand, prices, rents, competition and regulation for a specific area and property type, carried out to assess the opportunities and risks of an investment or development before a decision is made.
Market Saturation
Market saturation is the state in which the supply of a particular property type in a specific area exceeds the actual demand able to absorb it, so marketing and vacancy periods lengthen, rents or prices fall, or owners resort to incentives such as free months and discounts.
Market Trends
Market trends are sustained, measurable movements over time in prices, rents, demand, supply and the preferences of buyers and tenants, tracked with indicators and data to distinguish lasting change from temporary fluctuation.
Market Value
Market value is the estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing, where each party acted knowledgeably, prudently and without compulsion.
Neighborhood Quality
Neighbourhood quality is the overall standard of the environment around a property — safety, cleanliness, availability of services, parks and walkways, quality of infrastructure and roads, and how well neighbouring buildings are maintained and how compatible their uses are.
Opportunity Cost
Opportunity cost is the return an investor gives up by putting money into a particular real estate investment instead of the best available alternative with similar risk and time horizon — deposits, sukuk, units in a listed REIT or another property.
Price Per Square Meter
Price per square metre is the value of a property or plot divided by its area in square metres, used as a standard yardstick for comparing prices across properties of different sizes, districts and cities.
Property Valuation
Property valuation is a professional process in which an accredited valuer estimates the value of a property or real estate interest at a specific date, on a stated basis of value such as market value and for a stated purpose such as sale, financing or litigation.
Real Estate Bubble
A real estate bubble is a rapid, sustained rise in property prices beyond what fundamentals such as incomes, rents and financing costs can justify, driven by expectations of further gains, speculation and easy credit, and usually followed by a sharp correction.
Real Estate Cycle
The real estate cycle is the recurring pattern of property market movements through phases of recovery, expansion, oversupply and recession, during which prices, rents, occupancy, transaction volumes and new construction change, typically over several years.
Real Estate Investment
Real estate investment is the deployment of capital into owning property or rights in property, directly or through funds and financial instruments, to earn a return from rent, capital appreciation or development while bearing market, liquidity and regulatory risk.
Real Estate Leverage
Real estate leverage is using borrowed money — through real estate financing — alongside the investor’s own capital to buy a property worth more than their own funds allow.
Real Estate Portfolio
A real estate portfolio is the set of property assets owned by an individual investor, company or fund, such as apartments, shops, offices, warehouses, land and real estate fund units, managed as a whole to achieve a target return and risk level.
Real Estate Price Index
A quarterly index issued by the General Authority for Statistics measuring property price changes, with 2023 as base year and a 72.7% weight for the residential sector.
REIT
Real estate investment traded funds (REITs) are closed-ended public real estate funds whose units are offered to the public and traded on the Saudi Exchange (Tadawul).
Risk Management
Risk management in real estate investment is a systematic process of identifying the risks that threaten return or capital, such as vacancy, tenant default, price declines and regulatory and construction risks, measuring them, and then avoiding, reducing, transferring or knowingly accepting them.
Speculation
Real estate speculation is buying property — especially land — mainly to resell it within a short period and profit from price differences, rather than to live in, develop or earn rental income from it.
Supply and Demand
Supply and demand are the two fundamental forces that set property prices and rents: demand is the quantity of property buyers or tenants want and can afford at each price level, supply is the number of units available for sale or rent, and the price moves toward the point where the two balance.
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