I received the following email last week:
“I’m rather confused.
I really want to understand what influences prices in Belgravia as I’ve been looking… and see similar sized freehold homes varying from £5million to £25million in the same street!”.
To give a bit more flavour to the raw prices, the house at £25m is 6800 sq.ft. and the cheapest house at £6m is 3,250 sq.ft. so even if they look similar from the outside, they are very different.
The £25m house has also been newly renovated including a swimming pool and lift – the latter being more important as the house is over six floors and lifts in these houses are rare (as are swimming pools).
Meanwhile, the £6m house requires updating and is a fairly standard property. The three other houses that are available on the open market (I know of two more that can be acquired off-market) range in value from £7m to £12m.
Now, you may think that this is where price per square foot comparisons will help. Well, these are the prices per square foot for each house – £1832, £2222, £2147, £2677, £3691.
So, it would seem that one house is massively overpriced being 38% more expensive than the next most expensive house per sq.ft. in the street and double the cheapest. And I would agree that it is overvalued to a degree, but not by as much as you might think.
Also, the house that is available for £2677 per square foot is one to avoid simply because it only has three bedrooms above ground (there is a fourth bedroom on the lower ground floor and a staff room), which will make it unappealing to most buyers.
And then to confuse matters more, another of the houses is uninhabitable but is the third most expensive house on a price per square foot basis. This seems odd at first sight but actually makes sense.
In short, using a price per square foot valuation as your sole tool for establishing what is fair value is very dangerous. It is a blunt instrument because there are so many things that affect valuation:
- Condition of the property
- Configuration
- Ceiling heights
- Size and orientation of the garden
- The percentage of the property that is below ground
- Is there a lift?
- The facilities
- Location on the street
I could go on, but you get the picture.
And, in this particular instance, I wouldn’t advise acquiring any of them because, in my view, it is one of the less desirable streets in Belgravia and none are what I call a “Best in Breed” property.
In fact, this is a good example of how you can easily become an “Estate Agent Victim”. You can either massively overpay or think you are acquiring a house that is good value when there is actually a much better opportunity just around the corner.
I see this happen on a weekly basis and it is essential that you avoid making the same mistakes unless, of course, you don’t mind missing out on the best property your money can buy and/or overpaying.
To help you find a “Best in Breed” property and negotiate the lowest price possible, I have written a book, The Insider’s Guide To Acquiring £1m to £100m Property in London. You can request a complimentary copy by simply clicking here, emailing [email protected] or calling 02034578855 (+442034578855 from outside the UK).
The book will show you how to avoid the seven most expensive mistakes that you will make and there are also 30+ pages of negotiation strategies and tactics that I use to achieve prices for my clients that they didn’t think possible.
“The negotiations took several weeks and, to be frank, we didn’t think Jeremy would succeed in reaching an agreement at a price that would work for us because the sellers, especially one of them, were completely unrealistic. However, he found a solution and agreed a price that the agents didn’t think would be possible…
… the property was 28% below our maximum budget and the price he agreed was £335,000 below the maximum we had set for the property, so our investment in him more than paid for itself not to mention the wasted time and stress we avoided.” Mr & Mrs Cole (Chelsea)
So, to request a complimentary copy of my book, simply click here, email [email protected] or call 02034578855 (+442034578855 from outside the UK).
