In any article that compares the price of real estate in various cities around the world, you’ll read about the cost per square meter – or in America, the cost per square foot. In the US in particular, buyers figure they can renovate or rebuild in the allocated space, so the value of any real estate is essentially determined mainly by its size and the per square foot cost will fit within a clear price range. 

But that’s something we rarely talk about domestically in Australia, preferring instead to use median prices to calculate relative affordability between our cities. We prefer to believe that the number of bathrooms or bedrooms, the aspect, location and the standard of renovation heavily impacts the value – with size just another one of several variables. 

In fact, few Australians would ever even think to compute the per-square-metre price of property. And neither would their agents. Historically, the most common way to formulate current market value is to use recent comparable sales – the sale price achieved on nearby, similar properties. 

But in hot regions like inner city Sydney, using comparable sales at the moment to estimate sale price seems almost less than useless. With a shortage of available properties for sale and heady buyer demand, agents are at times left scratching their heads at erratic auction results that seem to have no relation to other market activity. Prices are more likely to be determined by how much an individual wants a particular property to suit their individual style and needs rather than what it’s “worth”. 

Case in hand; we are marketing a beautiful four bedroom property that’s been beautifully renovated. Every inch of land’s been maximised with an architecturally designed extension and massive entertaining deck. The only catch is, there’s now no yard. And the buyers looking for a four bedroom house are families, wanting among other things, a yard. There’s not a lot of competition on it, and if we were to compare the likely price per square meter of this property to another similar property that more effectively caters for buyer demands, they’d be at opposite ends of the scale.

Is it time to introduce the price per square meter into the property equation, as they do in the US? Would it give both buyers and vendors a better range of expectations, from which to begin their negotiation? Is it time for agents (and their clients) to look beyond their own domain, to see how real estate in other areas is being priced by the market?

I don’t know the answer, but it’s certainly an interesting question.