A question that I’m often asked is “What’s the average price per square foot or square metre” in Belgravia, Kensington, Chelsea, etc.?
The price per square foot formula works reasonably well in new buildings and new developments because there tends to be a standard finish and configuration to the apartments.There are of course some variables: the lower floors will be cheaper, while the higher the floor, the more expensive the apartments. Then finally you have the penthouses, which tend to be the most prestigious properties and trade at a premium.
But even in new developments prices can vary massively depending on the view; does it have a river view, does it not; does it face south, west; does it have a balcony, etc. So, there are numerous variables that can affect the price per square foot, even in a new development.
The problem in London is that there are a huge variety of buildings covering six centuries of architecture, and there are numerous areas within Prime Central London, all of which have their own primary, secondary and tertiary addresses often within three or four minutes’ walk. Consequently, even in a small area like Mayfair there are huge nuances within the area itself, even on the same street and in the same building, which can have a huge effect on valuations.
If you want to look at it in general terms, Mayfair trades at a very different price per square foot than Kensington. On the whole Mayfair is more expensive than Kensington. But then Kensington Palace Gardens, which is arguably the most prestigious address with the biggest houses in Prime Central London, trade for huge premiums to Mayfair.
It’s very important to compare apples with apples. So if you’re buying a second-floor apartment with a lift, and an agent or a seller says,“Well this should sell for £2,000 per square foot because number 36 in the road just sold for this price,” you need to be very careful. This comparable could be completely irrelevant if it were a first floor apartment with much higher ceilings and a balcony, as all these variables have to be taken into consideration.
Now if you’re extremely analytical, you may be asking the same question as one of my clients once did: “Well surely there must be a formula that says that a first floor with high ceilings should trade for x percentage more than a third floor apartment with a lift. Indeed there should be a formula to compare third floor apartments with a lift to third floor apartments without a lift. You should then be able to create a table of relative values, to give you a clear guide.” It’s a great idea. Unfortunately it’s unworkable, as there are far too many variables and it presupposes a standard that just doesn’t exist. Ultimately it’s a way of finding a shortcut to making valuations easy, and unfortunately there isn’t an easy way to do it. There is no actuarial table you can use. If you do try to standardise something that’s inherently not uniform, you will simply make an expensive mistake, or it will make you miss what is actually a very good opportunity because you haven’t been comparing apples with apples.
As a very simple example, around the year 2003 developers quickly realised that many people had started making naïve pound per square foot valuations. In older buildings with high ceilings they started adding mezzanine levels to boost the size of the property. In many cases the extra space detracted from the value, because glorious rooms with 5m ceilings were suddenly turned into two rooms with just under 2.5m head height. However, those using pound per square foot valuations missed this and overpaid.
Ultimately it’s essential you view as many properties as possible to get a feel for what is selling in the area.Just looking at details is not enough.It’s so easy to sit on the Internet and “view” properties, but they tell you only a tiny percentage of what you really need to know. They don’t tell you anything about the view, the quality of the building itself (if the building is poorly run you would want a discount), ceiling heights, sound-proofing, etc.
Ceiling heights – Another classic is people assume that if a property is on the third floor the ceiling height is not going to be as good as the first floor, but this depends very much on the architecture.There are some buildings where the third or fourth floor has incredibly high ceilings. I know of a number of fourth floor apartments where they have been able to create a double height ceiling on the top floor because they’d bought the roof space, and instead of adding another floor they’d put in this extraordinary studio style room with immense ceiling heights.
So, you really need to visit the properties and get a feel for this, and one must also remember that the photographs that you see on the agent’s websites and their details tend to flatter the properties.The job of the Sales Particulars is to get you in to look at the property, and people often say to me, “We’re shocked – the photos looked fantastic, but when we inspected the property it really needed a complete refurbishment”. But you must remember that the agents’ role is to sell their clients’ properties, so you cannot rely on the details. In defence of the agents, it should also be pointed out that plenty of people buy properties that do not fit the requirements that they give the agents, which is why you’ll often be sent properties that are totally unsuitable.
Having said all this, the price per square foot or square metre is a helpful guide but you must use it just as that, as a pointer.If you speak to any valuation surveyor they will admit that valuing a property is part science and part art.In fact, on a number of occasions we have had to help clients who are selling their homes because their buyer’s surveyor has valued the property at less than the agreed price.We have had to provide comparable details to the surveyor to show them that they are being too conservative.Fortunately, because we have an enormous database of properties that have sold we can provide the comparable data that justifies the price, and on the whole we are able to help them out in that respect.It just shows that even surveyors can get it wrong, because they do not see as many properties as we do.
So I’m afraid there is no basic pound-per-square-foot valuation for each area. The key is to look at as many properties as possible. In fact you should look at all the properties available that are similar to the one you want to buy even if you know they are not exactly suitable, as this will give you the best frame of reference. This in turn will give you a much better feel when looking at details of properties that have sold, so that you can judge whether they are good comparables. Ultimately it will be the properties that have sold recently that will be your guide to valuation.
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