Adrian Black delivers critical property market insights and the influences, behaviour and money driving them.
We have touched on the masking effect of new build on average property prices when analysing property price trends before – and it is beginning to get picked up as the important matter it is – we thought we should amplify the issue so that as many of us could benefit as possible.
Commentators typically express property price changes based on the sold price information for all types of properties.
Now consider a tap and then gold plate it – it’s worth more but the price of taps has not increased.
An extreme example but it illustrates the point.
We should not consider property price changes based on a mix of new build and previously built properties. Why? Simply because a considerable amount of money has been spent on the new build properties (often with highly indulgent amenities) and therefore we are not comparing like with like.
Taking West Prime Central London (year to date) – illustrated by our www.youeye.co.uk tool we find that excluding new build properties the average price of a property sold and reported at the land registry has fallen by 6.3% from an average of £1.885m in 2014 to a year to date average of £1.766m in 2015 (there is a “mix” factor too – but the message is clear). Including new build property is worth 4.6% less; a fall of an average of £1.925m in 2014 to £1.836m year to date in 2015.
It can be argued further that renovation expenses should also be removed from the equation too – but that discussion will have to be for another day.