Why price per square meter is the WRONG way to price a home
Price per square meter is a concept in real estate, which is easy to understand, and just as easy to misuse.
The formula is pretty simple: To determine price per square meter, you take a price, such as sale price of a home, and divide it by the square metrage of the property.
Price per square meter is useful in looking at broad market comparisons, such as comparing one entire metro area to another, or looking at an area’s average change over time. It is not, however, terribly accurate in figuring out the value of your home. Why? Well, price per square meter fails to take into account the most important factors when pricing a home.
First and foremost, it makes assumptions about the home’s amenities. We all know the quality of materials used in home construction and the condition of the home’s appliances and other features can have a dramatic impact on the value of a home. A kitchen with Italian marble surfaces versus one with pressboard countertops will have completely different values. Price per square meter in a given neighborhood will blend these homes together and produce an average.
Second, price per square meter assumes locations are identical, but in almost any area there are up-and-coming spots as well as areas in decline. Price per square meter near an abandoned industrial zone will vary considerably from one near a lovely village with all commodities with a great walkability score.
Third, even the simple methodology of calculating price per square meter can be influenced by how the total number of square meters has been calculated. If one has a garage converted into a guest-house, and another home doesn’t, which square metrage is valid? And what about home or plot size? Sometimes above or below-grade plots can influence the price per square meter as well.
Price per square meter is more useful in commercial situations where there is tremendous uniformity in the design, construction, and location, but as a tool for assessing your home’s market value, it’s flat out dangerous.
Want a real estimation of your home’s value in its current condition and location anywhere in France? We’d be happy to help. Get in touch today, and we’ll show you what goes into determining the optimal price for your home: TERRAFRANCE.COM — “call me back” — or call us on +33 (0)2.32.49.31.44.
