*Size matters

Data published by the Spanish government (Formento) yesterday makes interesting reading.

The average size of new apartments in Spain is now rising for the first time since 2004. The few developers with the budget and guts to be constructing properties in 2011 are today building apartments that average 103.2 m2 compared to 96.8m2 in 2008.

Detached homes are getting bigger too, up to 187.8m2 in 2010, the biggest size since records began.

It’s a similar story in the UK. Barratt, the nation’s largest builder, recently reported a huge uplift in profits as a result of a strategic shift into larger properties in 2009.

The lesson? In rising markets, developers focus on maximising the value of every square metre of land often at the expense of building properties that people actually want.

In the boom times, there can be a contradiction between the interests of the agent and those of buyers.

Smaller properties are easier to find and because of the lower entry price, are easier to sell to overseas buyers. The irony is these are exactly the kind of properties that nobody will want when the bubble bursts.

As an investment, smaller properties work when the location has scarcity power (water-front, close to transport links in cities etc)

Without it, smaller properties carry a significant commoditization risk as developers seek to cash in on rising land values.

You won’t see that in many sales brochures.

Source: Global edge

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