Price Per Square Metre: A Worked Example of Why It Misleads

The most quoted comparison in property is also the most misleading. A calculation showing what it hides.

Price per square metre is convenient, which is why it dominates property conversation. It compares two properties on one dimension and silently ignores several that matter more, as the example below demonstrates.

The situation

A buyer is comparing two apartments in the same district, both advertised at similar prices per square metre, and wants to know which represents better value.

Assumptions (illustrative)

• Apartment A: 140 square metres, price SAR 980,000, equal to SAR 7,000 per square metre.
• Apartment B: 125 square metres, price SAR 887,500, equal to SAR 7,100 per square metre.
• Apartment A: area includes a 20 square metre shared balcony allocation.
• Apartment B: area is internal only.
• Apartment A: annual service charge SAR 14,000. Apartment B: SAR 8,500.
• Apartment A: building is 12 years old with original systems. Apartment B: 4 years old.
• Assumed remedial work required in Apartment A: SAR 35,000.

Step 1: Correcting the area basis

Apartment A internal area is 120 square metres, giving SAR 8,167 per square metre of internal space against Apartment B at SAR 7,100.

Once measured consistently, the headline comparison reverses. Area definition is the first thing to verify, and it is rarely stated in advertisements.

Step 2: Adding immediate remedial cost

Apartment A effective cost SAR 1,015,000 for 120 square metres, equal to SAR 8,458 per square metre.

Condition is part of price. A property requiring work is more expensive than its listing suggests by exactly the cost of that work.

Step 3: Capitalising the service charge difference

The SAR 5,500 annual difference, over a ten year holding period, equals SAR 55,000 of additional cost for Apartment A.

Recurring costs compound over a holding period and are absent from any per square metre comparison.

Step 4: Comparable total cost of ownership

Apartment A: SAR 1,015,000 plus SAR 55,000 equals SAR 1,070,000 for 120 square metres. Apartment B: SAR 887,500 for 125 square metres.

Apartment B is both larger internally and cheaper in total. The original comparison suggested they were nearly identical.

Step 5: What the per metre figure did capture

Nothing decisive. Both figures were within two per cent of each other while total cost differs by over twenty per cent.

Price per square metre is a starting filter, not a comparison. It is useful for excluding obvious outliers and misleading for anything finer.

What changes the answer

• A shorter holding period reduces the weight of the service charge difference.
• If Apartment A were in a better position within the building, part of the premium could be justified.
• Different floor levels, views and orientation are not captured by area at all.
• Parking allocation, storage and balcony usability all affect value without appearing in the area figure.

What the numbers tell you

• Establish how area is measured before comparing any two properties.
• Add the cost of required works to the price before comparing.
• Capitalise recurring cost differences across your expected holding period.
• Use price per square metre to filter, then compare seriously on total cost of ownership.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

If you are buying, selling or investing, Domira can verify the documents, assess the property and build the numbers with you before you commit to a transaction.