Residential properties in London are being mis-sold on average by £33,800, according to PropTech firm Spec.
A new report by Spec claims that buyers and sellers across the capital are losing out on tens of thousands of pounds because of outdated and inaccurate property measurement techniques used to create floorplans.
In turn, these inaccurate measurements are being used as the basis of valuations, which is leading to properties being over or undervalued as a result.
The report - called 'Risks and Costs of Mismeasurement in Residential Property' - examines how outdated measurement techniques can have a considerable impact on the accuracy of a property's value and suggests that properties in the capital are mis-sold by £33,800 on average.
Across the capital as a whole, this means the discrepancy in valuations runs to just below £119 billion, three times larger than the total refunds and compensation paid out to customers who have complained about PPI since 2011.
Spec’s research team found that one in eight properties in the study had an area discrepancy of at least 100 square feet, equivalent to £57,697 in property value. Meanwhile, the average discrepancy across all properties was 54 square feet, equivalent to the size of a small bedroom or study.
Even small differences in a property’s stated floorspace can have a sizeable bearing on its valuation,, especially in high-value areas. Square footage being overstated could equate to the loss of hundreds of thousands of pounds.
The report also said it found clear evidence of widespread inaccuracies in data available to consumers. In 60% of cases, floorplans overstated the size of the properties, with Spec saying its findings highlighted the limitations of old-fashioned property measurement techniques.
“This is the great hidden scandal in the property market,” Anthony Browne, senior adviser to Spec, said.
“For almost everyone, their home is the most valuable thing they ever buy, but they usually have to rely on very inaccurate and misleading measurements that could affect its value by hundreds of thousands of pounds.”
He added: “It is ridiculous that when you buy a pint of beer or a pound of sugar you know exactly what you are getting, but when you buy your home you don't. The size of a home clearly affects its value, so it is essential that the measurements are accurate."
Browne said it was essential for prospective homeowners to obtain accurate size measurements for properties that they are buying. “Previously that was technically difficult and prohibitively expensive, but it is now quick and affordable to provide highly accurate floorplans, giving buyers and sellers peace of mind about the true size of their property,” Browne concluded.
According to Spec, the risks of wrong measurements due to human error, insufficient data and the systematic application of average sizes, reveal how the current regulatory processes in place for correct area calculation are failing. Spec is calling on current processes to be reviewed to make sure consumers are properly informed and have confidence and trust in the data they are provided with.
The Spec white paper report makes a number of recommendations to help consumers, estate agents and industry professionals to ensure that properties are being accurately measured, allowing the creation of floorplans that stand up to scrutiny and adhere to legal requirements.
You can read a PDF version of the full report here.