With so few transactions occurring it is hard to get an idea of values when the most common approach is the ‘comparative method’ (we cover some of the pros/cons in our investor reports) which tends to be most accurate when there are lots of sales happening [and for the same reason can be pro-cyclical].
A useful tool for potential property buyers is to see if they can purchase ‘below cost’, this is particularly useful when there are not enough transactions on the market to get good information or if you want to have a gauge you can use on your own.
Construction costs calculated every year by the Society of Chartered Surveyors in their ‘house rebuilding insurance guide’ and by using their estimates as a guide it can help potential buyers discern a good deal when they see one.
For instance, a 1,200 square foot 3 bed semi-detached in Dublin will cost (using their rebuild estimate of €177 per square foot) €212,400 to build.
If you are thinking about buying a property then do this sum to determine if it makes sense. If you are looking at a property up for sale and it will cost less than the cost of constructing the same property then it should help you to make up your mind.
People understand prices for many things by relating them to underlying cost, there is no reason why property should be vastly different. If you are able to identify property that is costing less than it would cost to build then it’s a good indication of value.
Using this method as part of a suite of valuation tools will help people by taking an independent measurement that is not as disputable as ‘asking prices’.
The costs for two common types of housing are below, so all you need to do is the following
Take the house you are considering; get the square footage and multiply by the cost listed below then see if it is higher or lower than the asking price with the Estate Agent. Simple yet effective.
Dublin Rebuild Cost per Square Foot
3 bed Terraced €171
3 bed Semi-D €177
3 bed Terraced €129
3 bed Semi-D €137
3 bed Terraced €130
3 bed Semi-D €133
3 bed Terraced €127
3 bed Semi-D €135
3 bed Terraced €128
3 bed Semi-D €137
Very interesting to see re build costs reducing, makes it easier to build and insure your house, well said Karl.
You can now calculate the Reinstatement Value of your property on http://www.selfbuildrates.ie. By calculating the reinstatement Value of your property you are ensuring you are not over insured and therefore wasting money on a high premium and not under insured and therefore at risk of your insurance pay out not covering the full cost of rebuilding your home! The calculating system was designed and is being monitored by Chartered Quantity Surveyors
Interesting, here in England build cost are coming down but land prices are still very high