House value

[pipme]

Can we find a reasonable approximation of the underlying value of our dwelling?
In DIY style, the experts just do not really seem to agree.
I have a plan …. But I am far from an expert.
Perhaps we can break down the costs involved in buying land and rebuilding our houses, by using some readily available information off the web?

Rebuild costs: - here
There could be a site clearance component to the ‘rebuild’ cost, given that the info originates from an insurance based source.

Land values: - here
Explore this page to it's end for interesting historical data.
The land values will be related to geographical area in Hectares (10,000 sq meters )

We will need the approximate area of the house and also of the plot, in square meters.

An example from the West Country: -

Small plot (<1 Hectare) Land approximate cost at Oct 2003 £2,500,000 per hectare approximately £250 per sq meter. ( for the sake of interest 1 Hectare is about 2.47 acres )

House 4 bed large semi-detached plus single detached (non-precast) garage.
Plot size 312 square meters … land value approx £78,000
Cost to rebuild approximate £130,000.. A house of average quality.

• Currently selling at = £265,000
  Land plus rebuild = £208,000
  Difference = £ 57,000

I am saying that, broadly speaking, the underlying value of the house in question is £57K below the ‘market’ valuation; it is therefore overvalued by around 27%

Are the assumptions reasonable?

P

 

[nstreet]

YOu forgot to add in the 3l factor that is obviously worth the extra 27% for that particular property

 

[pipme]

3 wot ?
You street people should know we farmers aint that subtle.
P

 

[AdamW]

I assume the 3l factor is "location, location, location" (not talking about the TV program with the pretty but porky woman ).

Now, it is a known fact that buying land and building a house on it is often cheaper than buying a pre-built house. Hence the reason that otherwise sane people go and undertake such a project.

Now, in terms of house value: a house is only worth what someone has offered you for it. Round here there are properties on the market for 20% more than they are really "worth" because even an idiot who just found a big bag of money wouldn't buy them for the asking price.

My sister used to go out with an up-and-coming estate agent. He told me that the first step in judging the value of a house is performed before they even see it. They just remind themselves of what other x-bedroom houses on that street have sold for, and start with that. Then they just add a bit if it is very nice, or subtract a bit if it is a s**t hole.

The underlying message is: your guess is as good as any estate agent.

 

[pipme]

I was really trying to extract the '3L' + inflated component.
I think this is important, to have in mind, especially if going for a large mortgage, when the market has been high for a long period .. is it at or nearing its peak?

I am guessing that this 3L + Inf is the part which suffers more quickly in the event of a market downturn. I would imagine land prices would take longer to feed in with depressed values - if at all.
An interesting point is that generally land prices seem to have increased on the average by around 11% per annum since '83, which suggests that lack of housing has kept the land market bouyant through the ups and downs of the housing market over that period.

I started on the ladder in 1982, I have seen interest rates at 15% on three separate occasions ... There is no guarantee that Gov policy on inflation will remain as is ... A new Gov may decide that higher inflation can better fuel the economy .. With the attendant interest rates dampening debt.. I think this would also cut the real value of Gov debt over time, isn't that how they complete the theft of our dosh?
Nice if we could do that ... Borrow big then reduce the value of the debt by reducing the value of the dosh.

Just thought it was interesting to attempt to tease out the underlying value ...

P

 

[pipme]

Hi,
I reckon a similar valuation method to the one I have outlined in first post may very well be used when the nationwide property revaluation is carried out, ref council tax or worse a local tax.

I guess the pill will be sweetened for many, who probably feel that market value will be used, they are then likely be happy with something less ..... Seems like a 'New Labour' type strategy again.


P.

 

[davydunt]

i wish i could go back to 2004.