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Home extensions increase property value by up to 23%

Cliff D'Arcy
by Lovemoney Staff Cliff D'Arcy on 11 September 2012  |  Comments 11 comments

The Government has reduced the rules surrounding home extensions. How much would extending your home increase its value?

Home extensions increase property value by up to 23%

For a limited, time, homeowners can extend their properties with larger-than-usual extensions and conservatories without seeking the usual planning permission from local councils. Businesses also get a boost, as shops, offices and industrial units will be able to expand significantly without seeking approval from local authorities.

For more, read Planning permission ditched for extensions and conservatories.

Add 23% to your home's value

The new rules may see a surge in spending on such home improvements.

Nationwide Building Society reckons that homeowners who take the plunge by extending or improving their homes could make sizeable gains. According to its research, extending your home can add a lot to its value -- depending on the scope and scale of your project, of course.

Based on an average three-bedroom British home, Nationwide calculates that adding an extension or loft conversion to your home could increase its value by almost a quarter (23%). This assumes that you increase your home's floor area by 30 square metres to create an extra double bedroom and en-suite bathroom.

Interesting improvements

Other big projects can add value, too.

For example, adding another double bedroom (floor area: 13 square metres) can push up a home's value by nearly an eighth (12%). Creating an extra bathroom could add 6% to a property's value, while increasing floor space by a tenth (10%) can add 5% to the average value.

Naturally, these improvements don't come for free. In fact, the cost of major extensions and improvements to your home can be substantial. Nationwide estimates that adding a single-storey extension to a typical home can cost £23,000, or around £1,000 per square metre. For a two-storey extension, this price tag more than triples to £76,000.

Improve, don't move

In more expensive parts of the UK, major building works can cost huge amounts. Even so, with relocating from a three-bedroom to a four-bedroom property costing on average £90,000 more, moving instead of improving can still make financial sense for growing families seeking more space.

'Lend to extend'

To take advantage of an anticipated surge in "lending for extending", Nationwide is offering low-rate further advances to borrowers wanting to increase their mortgages to pay for improvements.

While most other lenders charge high rates on a limited range of products for further advances, Nationwide allows applicants to access its entire range of mortgage deals, with a 0.10% discount for existing mortgage customers.

As a result, Nationwide's further advances -- available to both new and existing mortgage borrowers -- are among the very cheapest in the market, with rates as low as 3.19% for a two-year, fixed-rate loan.

Here's how Nationwide's further advances compare with those on offer from four other leading mortgage lenders:

Deposit

required

Nationwide

BS

HSBC

NatWest

/RBS

C&G

Halifax

Fee

£999

£599

£299

£999

£895

40%

3.19%

3.29%

4.59%

5.89%

5.69%

30%

3.39%

3.29%

4.59%

5.99%

5.79%

25%

3.79%

3.79%

4.59%

5.99%

5.79%

20%

4.09%

3.79%

5.29%

6.09%

5.89%

15%

4.59%

 -

6.19%

 -
 -

With rates this low as the leading deals above, a further advance can be an extremely cheap way to fund extra building work.

An alternative: cheap personal loans

If you don't have enough savings and lack the time to save up, then another smart way to fund home improvements is via an unsecured personal loan. This doesn't put the roof over your head at risk, making it less risky than a further advance or second mortgage.

To help you look into low-cost loans for adding space and value to your home, read Tesco and Sainsbury's cut loan rates.

More on home improvements:

How to make a rented house a home

How-to » Make home improvements

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Comments (11)

  • grelly
    Love rating 27
    grelly said

    So, how does this planning permission holiday work then?

    Suppose, for example, I already have an extension which doesn't have planning permission. Can I assume that it no longer needs it?

    [This is a true situation, my builder disappeared without supplying the council with the structural information they require(d). A bit of a stalemate as I can't tell them either.]

    Report on 12 September 2012  |  Love thisLove  0 loves
  • nosbort
    Love rating 126
    nosbort said

    @grelly

    That sounds like a building control (AKA Building Regulations) problem not a planning problem, Building control will still need to be satisfied as the laws relating to wiring and structural standards are unaffected by the planning process. I assume that you had planning permission before your builder started the process, otherwise you would have been liable to prosecution and may have to demolish what you had built.

    Building Control can be satisfied by getting a structural engineer to provide them with the calculations for the work done (I assume a supporting wall now has a beam or similar).

    Report on 12 September 2012  |  Love thisLove  1 love
  • coloratura
    Love rating 61
    coloratura said

    If I extend my home, which I would like to do, the Government will take 20%. If I pull my house down and erect a new one I will pay no VAT whatsoever. So if I have a choice between using say, $100,000 on an extension or £120,000 on a new home which one am I more likely to do. The reason the Government wants to give us an easing of controls on planning permission is because they want to receive lots of 20% VAT charges. At one time extensions didn't have VAT on them but gradually the VAT has been increased so much that only the fairly well off will have them. 20% of nothing is nothing so I think the Government would be better to drop the VAT on extention to say 5% (as well as the easing on planning permission) as many more people would then extend their homes whilst the opportunityy offered. It is all very well saying that to extend will increase your home value by 23% but that is only true if you can sell it and even if you can you still have to buy somewhere else. Drop the VAT and the Government still gets something whilst getting builders, carpenters, electricians etc in work (paying taxes on top of the VAT received) and thus getting the economy working. It is no use just dropping taxes for the wealthy because they are relatively small in number, We need a large number of people from all income brackets to be in work and purchasing goods and services and they will only do it if they have the money. Tax less and make more because of the numbers. It's a no brainer.

    Report on 12 September 2012  |  Love thisLove  0 loves
  • daffyduck
    Love rating 5
    daffyduck said

    Coloratura makes a good point on VAT and some stimulation brought on by VAT breaks would stimulate the economy for jobs and materials/products. Going back to around 1984 I rember the VAT being added to home extension work and the rush to build and pay was immense. Some people paid over the odds to get the work done before the deadline and others paid builders the whole cost in advance.

    There are always easy ways to add value and the easiest is a well placed conservatory. However bedroom additions are often not worthwhile unless you have a small house in a locality that has a greater number of larger houses and the extra bedroom fiits in with the local market valuations.

    The most likley example of not creating additional value to cover your costs is extending to a 6 bed house in an estate full of three bed houses.

    Report on 12 September 2012  |  Love thisLove  0 loves
  • shortchanged
    Love rating 17
    shortchanged said

    Doesn't matter how much the restrictions are dropped I could never afford an extension. I am concerned how these extensions might be detrimental to neighbours or the environment though. Restrictions were surely for a good reason.

    Report on 12 September 2012  |  Love thisLove  2 loves
  • timboreeves
    Love rating 3
    timboreeves said

    For a single-storey extension costing £23000 (like in the article for example) - the difference between VAT at 20% and VAT at 5% is less than £3000.

    The VAT element isn't really making it unaffordable for people. If you can affort the extension you can afford the VAT. You could save £3000 buying cheaper carpet and fixtures in your new space.

    Report on 13 September 2012  |  Love thisLove  0 loves
  • SiGl26
    Love rating 26
    SiGl26 said

    daffyduck makes an excellent point; beware the 'ceiling price' in a neighbourhood. Any oddball house will be difficult to value and may be difficult to sell (says the occupant of the only '50s house in a Victorian/Edwardian street; watch those agents squirm for a valuation when there's no easy comparator!)

    Report on 13 September 2012  |  Love thisLove  0 loves
  • Englishbloke
    Love rating 7
    Englishbloke said

    Stamp duty threshold may also be a problem. Adding value to a house with a value just below £250k may be difficult?

    Report on 14 September 2012  |  Love thisLove  0 loves
  • cal 69
    Love rating 1
    cal 69 said

    Interesting points made by many, and general agreement that lifting the restrictions may indeed create government revenue, not least if your own neighbor dumps an 8meter deep extension next to your (once sunny) patio forcing you to move - bring on the stamp duty, fees and further VAT!

    Report on 14 September 2012  |  Love thisLove  0 loves
  • New Move online estate agents
    Love rating 0
    New Move online estate agents said

    In most cases adding an extension should be for the benefit of the occupiers, as an extension rarely adds value. There are a few lucky individuals who do get it right where an extension blends perfectly with the original design of the property. Most people don't sell soon after the extension has been added, and the property is often sold years down the line when what was a new kitchen looks tired and dated and the flat roof is leaking. Converting the garage into a study may seem like a good idea, but what happens when prospective purchasers want to buy a house with a garage. How does this provide a return on investment or even add value? As an estate agent we are often asked the question about should i sell or add an extension. If you take into account the additional moving cost including stamp duty, is that more or less than it cost to build an extension. Posted by John Michael http://www.newmove.co.uk

    Report on 14 September 2012  |  Love thisLove  0 loves
  • matchmade
    Love rating 38
    matchmade said

    What this Government gives, it takes away with another. Yes, more people may build extensions, but it remains incredibly difficult for self-builders and small developers to build new houses: the only sites they can find are the so-called "garden grabbing" ones that are now very hard to find. Local authorities are adopting "localist" planning policies that largely block small sites and hand most housebuilding over to the national housebuilders and landowners, in exchange for the hefty bribe of 40% affordable homes and millions in infrastructure taxes.

    In addition, local authorities are cracking down on council tax exemptions: if you want to empty and renovate your house in my area, you have to pay 100% council tax, and you also have to pay if you go abroad for an extended period, work away from home for a few months, and if your house is empty while you try to sell it. Meanwhile, students who are self-evidently capable of paying £9000 in fees get a 100% council tax exemption, as do criminals, bankrupts and even people who have inherited a house and are awaiting probate on potentially hundreds of thousands of pounds in assets. As usual, any working person seeking to improve themselves is attacked mercilessly with tax, whilst millions of unproductive people and the asset-rich pay little or nothing.

    Report on 25 September 2012  |  Love thisLove  0 loves

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