This might seem to be a drastically different stance from my last post on the dangers of being overly emotional when it comes to property investment, however, I come into contact with a broad spectrum of investors, buyers, sellers, and tenants in my line of work. My purpose is to provide a balanced commentary, and to help moderate potentially self-harming behaviours I come across.
As I’ve mentioned in earlier posts, real estate, particularly residential property, is a very unique asset class. Even for brand new units direct from developers, units with exactly the same floor plan will have a slightly different view by virtue of the fact that 2 units cannot possibly occupy the exact same airspace, thus the views, elevation and orientation will be at least marginally if not drastically different.
I believe this is also why real estate contracts are one of the areas where specific performance can be ordered by the courts. I suppose it is recognised that sometimes monetary compensation simply cannot replace the enjoyment one obtains from owning a particular property.
If even homes with exactly the same layout can have nuances of difference, then is not rather artificial to compare homes on a per square foot basis? I can safely vouch by the sheer number of times I have people asking me, “what’s the floor size for this place, ah?”, that the average human being is unable to accurately gauge the floor area of a home. So why do we dwell so much upon this magic ratio of price to floor area?
I suppose it is difficult to quantify how pleasant or livable a space is in a strictly scientific manner. The pleasure one can potentially derive from a well-designed, ideally-located home is in fact priceless! But a good way to gauge the “homeliness” value of a property is how much a potential tenant is willing to pay to live in it. The irony is that transient tenants looking to stay in a home for a 2-3 year time line are, I think, a lot more focused on the value of a good home, whereas home buyers tend to get overly distracted by comparisons of numbers and ratios that may have little effect on the ultimate enjoyment of their homes.
Continue reading “Psf, psf – are we too obsessed with numbers?”