Price Per sqm
Price analysisPrice per square meter aims to help standardise the price of property and make it easier to compare different properties.
What is Price per sqm
Price per sqm is essentially the price of the property divided by the size. It aims to help you compare similar properties and develop a more apples-to-apples comparison between them.
Traditionally just comparing the price of two properties doesn't take into account that one property may be twice the size so it would be unfair to consider the cheaper property as better value. This is why we can use measures like Price per sqm to better compare the value of the properties.
Types of calculations
The simplest form of a Price per sqm calculation only looks at two values, the total size of the property and the price of that property. There are also ways we can modify the formlula to attempt to take into account different factors we may find important.
- Price per sqm
Simple measure that uses the total size of the property and the total cost to calculate a value which can be used to compare with other properties.
- Weighted Price per sqm
A weighted price per sqm attempts to take into account the different values placed on indoor vs outdoor space. This can be especially useful when comparing apartments where useable space is fixed.
Calculating our metrics
Price per sqm
To calculate Price per sqm we simply take the total price and divide it by the size of the property; let's take a look at an example.
- David purchased an investment property for $750,000
- The property is 124sqm
Formula
price / size$750,000 / 124 = $6048 per sqmDavid has paid $6048 for every sqmWeighted Price per sqm
Weighted price per sqm is similar to the calculation above however tries to take into account that indoor vs outdoor space may not be as valuable to everyone; let's look at another example:
- David purchased an investment property for $750,000
- The property an apartment and has 110sqm internal space and a balcony of 14sqm
Formula
price / (indoorSize * indoorWeight + outdoorSize * outdoorWeight)*We assume a 40% value on outdoor space when compared with indoor space$750,000 / ( 110 * 1 + 14 * 0.4 ) = $6488 per sqmDavid has paid $6488 for every sqmStraight away you can see that although the price and size of the apartment have not changed the value has changed by 6.7%.
It should be noted that for some people outdoor space may be more valuable than for others, which is why this metric is great to help account for those differences.