Friday, 30 January 2015

To the untrained eye, it would appear that a flat costs more than a semi-detached house.

From page 4 of HM Land Registry's December 2014 House Price Index (pdf):

Average prices by property type (England and Wales)

Detached - £279,298
Semi-detached - £167,069
Terraced - £134,226
Flat/maisonette - £170,822

The relative prices of detached, semi-detached and terraced houses are pretty much in line and as you would expect.

But why is the average price of a flat higher than the average price of a semi-detached?

Simples, it's Von ThĂĽnen's law of rent, which factors in transport/travel costs.

People make a trade-off between convenience (living near the centre) and comfort (having a nice big garden), regardless of income. So you end up with flats in city centres and houses in the suburbs, with people being prepared to pay pretty much the same in £-s-d for either.

To exaggerate this effect further, the bigger the city, the bigger the trade-off between convenience and comfort; so the bigger the city, the more flats there will be.

So most flats are in the centre of the biggest cities, where the convenience premium is highest and most houses are in smaller towns and cities and at the outer suburbs of larger cities.

Or put it this way, they are not comparing the price of a flat with the price of a semi-detached house on the same street; they are comparing the price of flats in the centre of large cities (where land is very expensive) with the price of houses in smaller towns and cities and the outer suburbs of larger cities (where land is much cheaper).


Dinero said...

ha - ha ! sweet little nugget of info.

Lola said...

Classic comparison failure. I keep pointing these out to Mrs L. She keeps hitting me - and not in a good way.

Jim said...

A bit like the average person having less than 2 legs.

I paid just Just under the Semi price, which of course is less than the flat price and I got a 3 bed detached and a big garden. I should go on the "I'm so money supermarket" advert :)