Making price per square foot meaningful

A Metro reader recently emailed me asking if I had a table showing what price per square foot he should be paying in different postcodes in central London.

Unfortunately, it’s not that simple. The London housing market is quite complex because the properties vary so much. Even within the same street, architecture can vary, and with that, so do ceiling heights, windows and the amount of light, not to mention the tenure of the property (whether it’s leasehold or share of freehold or freehold). Therefore, whilst there is a price per square foot range within postcodes, it is impossible to apply an average to a specific property as you need to adjust it to take into account the property’s good and not so good characteristics.

If we take Knightsbridge as an example, the average price per square foot paid in the area is approximately £2,000 – £2,500. However, a lot of the properties in One Hyde Park sold for close to £4,000 per square foot, which was an anomaly for the area and this price level only really applied to this particular development. Other properties which are spectacular and unflawed may sell for only £1,500 per square foot because they have a shorter lease, for example.

If you’ve found a property and are trying to work out what price per square foot you should be paying, there are certain things you can do to gauge this. The first thing is to find other properties which are comparable to yours, then work out what price per square foot they sold for.

When doing this exercise, don’t look at unsold properties and use their asking price because it’s meaningless. An asking price doesn’t represent what the market will necessarily pay. Once you have some comparables, you can then relate them back to the property you’re considering buying. If your comparable property leads onto a shared garden, and the one you want to buy leads onto a private garden, you can expect to pay more for yours, and so on. That way you’re adjusting the realistic price per square foot to take into account your property’s specific characteristics, so that it becomes a meaningful measure.

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