Price per square metre is what people pay for each metre of land they buy. It’s a tool people use to compare properties and locations.
To figure out the price per square metre, take the total cost of the home (say $500,000), and then divide it by the size of the property (100 m2, for example). In this case, the price per square metre would be $5,000.
Why is It Useful?
The primary reason people use price per square metre is that it helps identify market trends. Comparing price per square metre over a period of time will help give you a better snapshot of property values as compared to median prices.
It’s a Yardstick
A metre is a metre in every town and every state. You can use this number to compare properties in dramatically different parts of the country, which will help you make more informed decisions.
Shift the Focus to the Land, Not the Building
Buildings depreciate, but land does not. It’s always a good idea to pay attention to the land you’re building on, even if your dream house will end up on top of it. “New” features will not be new in 20 years, but the land your home is on will still be land. Use price per square metre to get a good idea of the value of the land, and use this information to make a smart investment.
How Can it Mislead You?
How You Use Land Matters
While two properties may be similar in size, always remember that every home is unique, and the value of it will depend on how the land is used. A 100 m2 home will not be the same as another home of the same size, so don’t rely just on the price per square metre to make your decisions.
It Doesn’t Tell the Whole Story
The price per square metre metric is dependent on the size of a house. A small house in an area where property values are high will produce a higher number than a much larger property in areas where prices are lower.
Another thing to consider is the number of floors the home has. Houses with two storeys are more likely to produce a favourable price per square metre as compared to a one storey home, largely because the living space is larger. But the land might be smaller, or the space might not be used as well, so make sure to pay attention to all of these factors.
Overall, price per square metre is a useful and informative way to compare houses across different areas. It’s most helpful when looking at similar houses over a period of time to get an idea of what to expect in terms of appreciation. It’s true that it’s not a perfect measure, but it’s still something you should consider when researching homes and properties to buy.
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