Rising house prices

In July, the average UK property price was £261,221, up 7.6% on the previous year, according to Halifax bank. Regionally, Wales saw the strongest growth at 13.8%. In Yorkshire, an 11% gain was the highest for over 16 years. By comparison, London only saw an increase of 2.5%.

The latest ‘UK Residential Market Survey’ by the Royal Institution of Surveyors (RICS) found fresh listings of properties for sale are increasingly scarce. Lack of supply is pushing up house prices, say the industry body. “There remain more buyers than sellers and many properties are selling above asking price,” commented chartered surveyor Kenneth Bird, of Renton & Parr in Wetherby, Yorkshire, in the August RICS report. In the East Midlands, Peter Buckingham of Andrew Granger & Co added: “Demand for homes remains strong, although there is shortage of dwellings for sale in all price brackets, especially at the top end.” In Cambridge, Kevin Burt-Gray, of Pocock & Shaw, said: “Still much interest from prospective purchasers and a shortage of new instructions coming onto the market. Demand for one and two-bedroom homes relatively low but high demand for three-plus bedrooms.”

Adding value

Extending a property can add significant value to a home. A two-bedroom house that has been expanded into three bedrooms is worth significantly more - as anyone who watches TV’s “Homes Under the Hammer” will know. So, not only do you enjoy more space, but you may make a profit if you sell too. Plus, you can save money on stamp duty (the tax holiday tapers off on October 1, 2021) and the other costs associated with moving house, such as solicitor fees.

Exactly how much value extending would add to your home will depend on many factors, including the location and build costs. It’s no good adding £10,000 in value if you spent £50,000 in the process. The location, quality of your street and the natural ceiling price of your property should all be considered too. In some cases, it will make more financial sense to move.

How much do house extensions cost?

As a rough rule of thumb, the average cost per square metre for house extensions in London and the south-east is around £2,000. You can expect to pay less in other parts of the UK. The more floor space you require, the more you will have to pay. The price will also depend on the type of project. Digging out a basement is always expensive – around £3,500 per metre. Two-storey extensions cost more than single-storey, not least because scaffolding is needed to work at height. Loft conversions can be a cost-effective way to add living space to your home but will still cost £20,000-plus. Building a home extension isn’t cheap, no matter what type you choose.

Areas where it pays to extend

Homeowners in high price areas like London have long known it can pay to expand their homes – even digging down into the basement. But recent research by estate agents Hamptons International showed that it has become profitable to build an extension in the Midlands and the north of England for the first time, as growth as in property prices accelerated in these areas while slowing in London and the south-east.

Districts where extensions were newly profitable in 2020 included East Riding of Yorkshire, Staffordshire, Cannock Chase and Dudley in the West Midlands, Newark and Sherwood in the East Midlands. Owners in a further 37 local authority areas in England and Wales were within £5,000 of breaking even when extending if house prices continue rising at current rates. Meanwhile the ten top spots where it paid the most to extend included: Central Bedfordshire; Canterbury; Castle Point Essex; Southend, Essex. Milton Keynes; Braintree, Essex; Havant, Hampshire; Manchester and Hambleton, North Yorkshire.

However, in other areas, such a Swindon in Wiltshire and Thanet in Kent, the value added by an extension is only marginal – less than £100 after building costs. Hamptons calculated regional construction costs from Office for National Statistics and how much value the average extension would add in the area using Land Registry and Energy Performance Certificate (EPC) Register figures. 

Do the maths

The value an individual extension will add, depends on multiple factors,including the sort of room it is – extra bedroom, bigger kitchen – size, and quality of construction as well as the type of property and location. A good architect should be able to give you an initial estimate of the building cost. Meanwhile a helpful local estate agent is best placed to advise on how much value it might add.  Do the maths. Clearly, the option of extending rather than moving is one that owners need to carefully consider, particularly at a time of rising house prices.