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Wednesday, June 08, 2011

Property development estimations

Ive just been looking at a piece on the most expensive house outside of London, a 75 million mansion in Surrey. It reminded me of the importance of realistic guesstimations for a property developer.

The amount of times I've witnessed landlords and property developers putting projects on the market at completely unrealistic prices. Unfortunately they have often based their investment strategy on getting close to a 'pie in the sky' price for their development.

Some developers seem blind to the nuances of property valuations. Just because a 4 bed detached property down a street has sold for 'x', doesn't mean that all 4 bedroom detached properties on that street will be worth 'x' also.

Values are effected by list of un-measurables outside of square feet and inches. The exact position on the street, (quiet side with a better view), the kerb appeal, ( some properties are just ugly), the homely feel ( the personal touch of an owner and their possessions), the interior layout, (the maximising of the use of light and space) and others. Influences on demand that can push a value up or down.

The number of times a wannabe developers tries to push a secondary property ( that they've bought cheap in the first place, because nobody wanted it for some reason) on to the market at a inflated price just because they've used a pot of magnolia paint and have stuffed a poorly designed kitchen from B & Q in it.

A property is worth what someone is prepared to pay for it! So developers need to be realistic about their estimations or risk feeling short changed once it is finally sold.

Which brings me back to the article on the most expensive property outside London. This property has been up for sale since just after I learned to walk and still hasn't sold. It's returned to the market for another go, at even more money than it was on for before.

Whose going to break the news to the developer?

Read more about the 75 million property here

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