Sales proceeds: what is it and why is it important?
The term sales proceeds plays a crucial role in the property market, especially in a dynamic market like Dubai. Sales proceeds is the amount that is realised from the sale of a property. This includes both the base price of the property and any additional income that can be generated from the sale. In this article, we explain the meaning of the sales proceeds, the factors that influence them and what sellers should bear in mind.
How are sales proceeds calculated?
The calculation of the sales proceeds can vary depending on the type of property and the specific market conditions. The basic formula is:
- Sales price – costs = sales proceeds
The following factors should be taken into account when calculating the sale price:
- Condition of the property: a well-maintained home will generally achieve a higher sale price.
- Location: Properties in sought-after areas such as Dubai Marina or Downtown Dubai tend to have higher selling prices.
- Market development: When the property market is booming, selling prices are usually higher.
Factors that influence the sales price
Several factors can influence the sale price of a property:
- Property valuation: the professional valuation of a property can significantly influence the potential sale price. Methods such as property valuation by RICS or by local estate agents for the estate agency are used here.
- Incidental purchase costs: These costs should also be taken into account when setting the price to ensure that the sales proceeds meet expectations.
- Market trend: Knowledge of the supply and demand situation can be decisive for pricing. Pay attention to market trends and adjust your strategy accordingly.
Why are sales proceeds important?
The sales proceeds are of central importance for sellers, as they represent the economic result of a sale:
- Financial planning: the proceeds can be used to finance a new property purchase or for other investments.
- Determining profitability: Sellers can analyse the success of their investment by comparing the sales proceeds with the original costs.
- Tax aspects: The sales proceeds are also important from a tax perspective, as they form the basis for calculating capital gains.
Illustrative example on the topic: Sales proceeds
An illustrative example of the sales proceeds could be a family selling their flat in the Jumeirah Beach Residence (JBR). They bought the flat for AED 1,200,000 and invest AED 100,000 in renovations and improvements. After two years on the market, the family realised a sale price of AED 1,500,000.
The calculation of the sale proceeds in this case would be as follows:
- Selling price: AED 1,500,000
- Total cost (purchase price + improvements): 1.aED 300,000
- Sales proceeds: AED 1,500,000 – AED 1,300,000 = AED 200,000
This example shows that the sales proceeds are a decisive factor for the family’s financial planning and at the same time reflect the successful resale strategy of the property.
Conclusion
Sales proceeds are an indispensable part of the property industry in Dubai. From the calculation to the factors that influence it, a sound knowledge of it is crucial for sellers. Are you interested in selling your property, or do you want to invest in the market? Find out about other important topics, such as property valuation, to maximise the return on your sale.
