Some homes could be worth 12% more than their neighbours – but why?
The quantitative case for a design premium
The widely accepted view that good design commands a premium price is rarely supported by robust analysis. The agency The Modern House and established property market intelligence company Dataloft have address this by asking;
Is there a premium for design-led properties?
While analysing over 14,000 residential sales by price per square foot rather than average values is particularly relevant for design led properties, where perhaps space is used in a different way. For instance, a design-led one bedroom property might be the size of a typical mainstream two bedroom property. The per square foot analysis makes a possible true like for like comparison and yields greater insight.
Of course, there are many other variables, including the property’s condition, outbuildings and leasehold terms etc. During the study these were controlled for where possible. Using the £ per sq ft as the comparator and having access to a large sample of 212 sold properties, pre-selected as design focused, made it possible to isolate the impact of good design on value.
The extensive analysis revealed a price premium of +12% for design-led homes.
While the premium hasn’t varied significantly over the last few years, there are interesting trends within this. Analysis of the data by market value demonstrates that higher value markets tend to have a higher percentage premium.
Typically, across the whole period analysed, in higher value markets (where the sale price was over £1 million), the design premium was as much as +19%. In lower value markets the premium was reduced, but still significant at +10%.
Having great design and a good knowledgeable estate agent is key to reaching the premium price for a property where the research now shows evidence of the monetary value of focusing on design. So, if you are focusing on your next property project then it certainly appears that it is good to stand out from the crowd.
However, remember there is more than great design to achieving premium prices. So, before you delve into any project here a few quick tips.
- Know your market – Do not envisage selling a property for £450,000 when the other similar local properties sell for £250,000.
- Understand your finance options. Depending on your project you might find better alternatives to finance your project.
- Learn and research your budget spending for the refurb – overspending is common and can be very dangerous.
- Refurb to sell – know your buyers and what they want – not necessarily what your own favourite style is.
- Roughly 20% return on value (not on your cash).
- The rule of 3 – Try to be realistic, work out a “best case” scenario, a “likely” scenario and a “worst case” scenario.
I will be covering more about property refurbs in a future article, but if you want to learn more or get some advice you can contact me at firstname.lastname@example.org or on 029 2168 0006. Alternatively you can follow me on Facebook under Cardiff Property Info – or on my blog https://cardiffproperty.info/