by Varnavas Playbell
Price per square meter is most frequently used metric in real estate transactions. However there no uniformity amongst practitioners on what “meter” means and it causes great misconception, especially to buyers. Is it covered areas? Does it include covered verandas? Is it all areas covered and uncovered? What about parking storage and allocation for common areas? If there is no common denomination of what a “meter” is, then there can be no real comparison or evaluation of one property over another as you are not comparing like for like.
My suggestion is to use the concept of “relative meters” whereby covered areas, as the most relevant factor, are designated a full (one) meter per area, but all other areas are discounted, reflecting the reduced use and/or related construction cost. For example, covered veranda is 50% then 2(two) meters of covered veranda equal to one “relative meter”. There is no exact formula on the discount that should be applied, and a number of chartered surveyors and other practitioners may disagree on the exact figure, but it does not really matter, as long as it is followed consistently between two properties compared.
The matrix I am specifically suggesting is covered (100%), covered verandas (50%), uncovered verandas (20%), roof garden (15%), dedicated parking and storage (0%) allocation for common areas (0%) and mezzanine (50%), as applicable. For ease of use, I created a free, online, automatic calculation tool.
In an example, a two-bedroom apartment is priced at EUR 350,000 plus VAT, for a 75 m2 covered area, 20m2 covered veranda, 10m2 uncovered veranda, 10m2 storage, 12m2 dedicated parking and 45m2 allocation of common areas. Applying the above formula, the relative meters, (namely “sellable”) are 87m2, thus EUR 4022 per relative meter. Using this metric you can more accurately compare to any other property with similar characteristics and specifically you can evaluate how any price difference is attached to features of quality and not quantity, such as location, quality of construction, view, road network , extra amenities such as pool, gym, etc.
The only way the concept works, to the benefit of developers, buyers and all real estate practitioners, is if it’s used consistently, so everyone compares like for like, taking into account all characteristics for each property. In fact, given the gravity and reliance given to this metric, perhaps it should be a legal requirement that anyone advertising property with a “price per meter” must refer to a predefined set of rules, such as my proposal on relative meters.
Playbell & Co
Author, The Property Lawyer
