Valuing homes by the square foot
There are so many ways to alter a property. The same short description ‘three bed terrace’ or ‘four bed semi’ might gloss over a kitchen extension, an en-suite carved out of a master bedroom or a knock-through kitchen diner. All of which makes analysing average prices on a truly like-for-like basis, increasingly difficult. A one bedroom penthouse apartment and a small one bedroom flat are both defined as ‘flat’ in Land Registry data.
Measuring price per sq ft goes a long way to addressing these anomalies. For an agent valuing a property, it makes comparisons far more precise and £ per sq ft is an essential metric for investors and housebuilders in calculating land values.
Central London buyers have become familiar with it as a way to compare capital values, driven partly by the expectations of overseas buyers who tend to ask for price per sq ft. Developers using modular construction techniques can talk about the size of their homes before committing to particular room layouts – and, in time, movable internal partition walls could become more common to allow homes to adapt to changing household circumstances.
Our map of £ per sq ft also raises interesting questions about why prices differ from place to place. It is no surprise to see an enormous red area covering London, indicating high values per sq ft, but it is also clear that high values are not confined to the South East. Nor does it necessarily highlight the most obvious hotspots outside of the South East.
If we were mapping average prices, we would see hotspots in places with very large homes, like Alderley Edge in Cheshire. But our map shows very distinct hotspots in the Lake District, North Norfolk, the North and South Cornish coast and Bristol. Some of these are in places with small but sought-after homes, like picturesque villages in National Parks, that have a high value per sq ft.
These days, most agents’ particulars have a floorplan with room measurements and often this will include the total size of the property. But the Land Registry sales data does not include size and, until recently, any attempts to produce analysis of £ per sq ft across most of the UK have been hampered by restrictions on data availability.
No longer. Using the Energy Performance Certificates published by DCLG, it is now possible to assign a size to every sale transaction recorded at the Land Registry by matching the two data sets. This means it is possible to analyse the average price paid per square foot for cities, postcodes, counties or regions across the country.
This Dataloft map shows average £ per sq ft house prices, across England and Wales, based on an analysis of 470,000 sales recorded so far in 2017.
While there is a clear pattern of high values weighted towards the South East, the price per sq ft tone associated with the wider South East is replicated in pockets across the UK. In fact, every region has at least one pocket of yellow and there are clusters around York and Harrogate, the Peak District and Cheshire.
But if affordability is the driver, it is clear that the North East, North West and Wales continue to be the UK’s most accessible housing markets. It is interesting to speculate on what HS2 could do to this map when it reduces rail journey times to London, and also what influence it might have on the emerging trend for young professionals, priced out of London markets, to buy property elsewhere and rent somewhere to live in London.
From hotspots in the Lake District and second home destinations in North Norfolk, to higher values in established commuter towns in the South, this analysis gives a new way of exploring the housing market for sales and lettings.