Whenever somebody on my street sells a house, I briefly turn into an amateur property analyst. I check the photos, compare the floorplan with mine, look up what they paid for it and then make a completely objective assessment of why my property is obviously nicer. This is ridiculous behaviour, but I suspect half the country does exactly the same thing.
Property makes otherwise sensible people competitive.
Someone two doors down sells for £600,000 and suddenly it becomes important that our kitchen is larger. We have the better garden. Their loft conversion is a bit awkward. Surely ours must be worth £625,000.
Possibly.
Or perhaps not.
Comparable sales are one of the most useful pieces of evidence available when valuing property, but the important word is comparable. That word gets stretched beyond recognition by homeowners, estate agents and occasionally journalists desperate to turn a couple of transactions into a story about an entire city.
A house that happens to be on your street is not necessarily a proper comparison. Neither is a flat in the same block.
Consider something as simple as floor level. In some buildings, being higher up adds value because you get better light, less street noise and perhaps a view. In others, a fourth-floor flat without a lift is something buyers contemplate while rubbing their knees.
Outside space can make a huge difference. So can parking. So can whether a property is freehold or leasehold, the length of that lease and the amount of service charge being demanded each year.
Condition matters too, but not always in the straightforward way homeowners imagine.
People love to total up what they have spent on renovations and mentally add it to the property's value. Unfortunately the market doesn’t reimburse you pound for pound for your decisions. Spending £40,000 on a kitchen does not automatically add £40,000. Buyers may love it and pay a premium. They may think you have committed an unforgivable crime against cabinetry and plan to rip it out immediately.
Taste is awkward like that.
The same applies to extensions. A well-designed extension that creates a brilliant kitchen and useful living space can transform a home. A badly designed one can create an enormous dark room that requires the lights on at lunchtime.
Both owners may have spent £100,000.
They have not necessarily created £100,000 of value.
Then there is the market itself. The price achieved by a neighbour during a frenzy of cheap mortgages and sealed bids may be a poor guide several years later when buyers are far more conscious of monthly repayments. Equally, a sale during a particularly weak period might undersell what the same property would achieve when confidence returns.
Property valuation therefore involves an irritating amount of context.
People would much prefer a formula.
Square metres multiplied by postcode multiplied by number of bathrooms equals your answer.
Sadly, houses don’t work that way.
One of the most overlooked factors with flats is the lease. It is easy to understand why. People buy homes emotionally before they buy them legally. They walk through the door and imagine where the sofa goes. Nobody gazes dreamily at Clause 7.3 of the lease.
But the legal interest you are buying matters.
A flat with a very long lease is not financially identical to an otherwise similar flat where the lease is approaching a point at which buyers and lenders start becoming nervous. The shorter lease may sell for less precisely because the new owner can see a future bill coming.
This creates a slightly strange situation when valuing a leasehold property for a lease extension. You are trying to establish what the property is worth, but the lease itself is one of the things influencing that value.
It sounds circular because it partly is.
That is why specialists spend time looking at long-lease values, short-lease evidence and comparable transactions rather than simply typing the postcode into an automated valuation website.
This matters particularly in London because individual streets and even individual blocks can behave like tiny markets of their own. One development might be highly sought after because it has a concierge, parking and sensible service charges. Another development five minutes away may look equally impressive but have an ongoing cladding issue, eye-watering major works or lease terms buyers don't like.
A postcode cannot explain all of that.
Nor can a headline about average London property prices.
I think we became slightly lazy about valuation during the long period when prices seemed to rise almost regardless of what happened. If everything is going up, arguments about whether a property is worth £475,000 or £490,000 feel fairly academic. A few years later both numbers may look cheap.
In a flatter or more uneven market, precision suddenly matters again.
Buyers compare harder. Mortgage payments matter more. Homes sit on the market longer if sellers get the asking price wrong.
And leasehold issues stand out more when buyers have alternatives.
That last point is worth considering if you are putting off a lease extension because you don’t plan to sell immediately. You might not care today. A future buyer probably will.
The difficulty is that extending a lease involves another valuation process, and the property's value itself can influence the premium. This is why you want evidence rather than neighbourhood gossip.
“Dave in Number 14 says his is worth £700,000” is not evidence.
Dave may be lovely.
Dave may also have been trying to sell it for £700,000 since Easter.
A completed transaction is more useful. Several genuinely comparable transactions are better. A professional who understands which differences require adjustments is better still.
There is no harm whatsoever in checking what your neighbours sell for. I will continue doing it because I am human and nosy. Just don't confuse curiosity with valuation expertise.
The house down the road tells you something.
It doesn't tell you everything.
That becomes particularly important when a lease extension is involved, because an inaccurate assumption about value can change what you expect the whole exercise to cost. For a useful explanation of the connection, read why your flat’s value matters when calculating a lease extension before deciding that the sale upstairs has settled the matter.
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