What is a property really worth?
By Jo Eccles
Q: I’ve found a property to buy but how do I know what it’s really worth?
A: In central London, property is usually valued using a price per square foot principle, so, if you’re buying a property in central London, you should straight away work out what the asking price equates to on a price per square foot basis. Then you need to find out whether the asking price is a fair price for the property, or if you should be negotiating it down.
Remember some properties are priced to sell and asking price represents value – or some are even priced below what they’re worth in an attempt to generate a lot of interest which will push the price up. In the current market, though, I’d say about 70% of properties are priced with room for negotiation.
So how do you find out what your property should be selling for in price per square foot terms? In reality, it’s quite hard to do as the property industry holds this information quite close to its chest. This is where a good buying agent becomes very valuable as they can give you exact pricing data and advise on what the property is really worth. If you’re not using a buying agent you should find comparable properties which have recently sold and compare their sold price per square foot.
I was recently asked by a client if we had a map showing the price per square foot figures for each part of London, but I had to explain that it would be an incredibly complex map because London is made up of so many micro markets. Even if we look at Islington, for example, prices vary enormously if you’re buying in, say, Barnsbury versus off the Essex Road, and even if you separate the different pockets, there is still a big price differential if you’re buying a house versus a flat. Even then you need to drill down further as flats usually sell for a different price per square foot than houses, and properties will be valued differently depending on what floor they are on, what their outlook is, or which way the garden faces.
If you’re deciding what to bid for your property, my advice is to trawl estate agent and property websites to gather as much information as you can on recently sold properties which are similar to what you’re buying, then find out what they actually sold for, rather than their asking price. However, you may need to call estate agents and do some detective work to obtain this information as Land Registry has a several month time lag with their data. This will start to build a picture of what your property is really worth.
If you have a question you’d like Jo to answer please email firstname.lastname@example.org or tweet her @joeccles.