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Does an extension add value to your house?

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Does an extension add value to your house?

Extensions are an increasingly popular way of increasing the space in your home. They are a great way of creating larger living spaces, or new rooms, without the cost, stress and hassle of having to move house. The typical extension can cost anything from £1,500 to £2,500 per m2. However, does an extension always add value to your property?

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How much value does an extension add to your home?

How much an extension will increase the value of your home by depends on the placement, size, and construction. The vast majority of well-built extensions will add value since they increase the size of your property and improve and update the living areas.

How profitable building a new extension is will depend on lots of factors:

  • The ceiling height of property prices in your area
  • How much the extension project has cost
  • Whether you are looking to sell immediately, or in the future
  • The nature of the design and build of your extension
  • The quality of the work and materials used

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The value of home extensions

If you are thinking about the most profitable extensions for your property, then kitchens and bathrooms tend to add the most value. Another consideration is the balance of your property; if you create large living spaces with a small number of bedrooms, this will restrict the saleable value of your home.
Creating a balanced space with the right number of bedrooms compared to the correct size of living space will make your property more valuable, and more saleable.

  • Loft conversions add from 12.5% up to 21%
  • Double-height extensions add up to 11%
  • Conservatories or sunrooms add between 5-15%
  • Garage extensions add around 10% and up to 20% in urban areas
  • A modern kitchen adds about 4% to the total property value
  • Additional bathrooms increase your selling price by around 5% each

Budgeting for added value

Most homeowners do not build an extension solely to make a return on their investment. Extending your home avoids needing to move, and cuts out the substantial costs of selling your property and buying another.
These costs include things like:

  • Estate agents fees
  • Stamp duty
  • Removal costs
  • Solicitors' fees
  • Valuation and surveyors fees

However, if you want to make sure that your extension does add more value than the cost of the build, it is worth thinking about the quality of finish and what purposes your new conversion serves.

For example, a conservatory can add from 5% to 15% to the value of your house. Simple pre-fabricated sunrooms will be at the lower end of the spectrum, and full-blown extensions will be at the higher end of the scale.

This type of extension will cost between £10,000 - £75,000 with the highest budgets for bespoke, double-height fully glazed conversions. If you spent, say, £20,000 on a conservatory extension, it would likely add around 10% to your property value.

The median UK house price is currently £248,271, so a 10% increase would add £24,800 in value, thus providing an immediate return of £4,800.

However, this is a short-term outlook, and it is worth remembering that the value of an extension appreciates over time. As your home increases in value over the years, so too do extensions become more valuable, particularly in areas where space is at a premium or where new-builds are rare.

You may find that an extension that adds 10% value immediately will be worth exponentially more in a few years.

How to add the most value to your property with an extension

The key considerations when ensuring that your extension adds the most value are:

  • Using skilled tradespeople - a well-built extension made from quality materials will stand the test of time and be ultimately more valuable.
  • Think about the design, and how your extension integrates with your home - a nice flow between rooms and an abundance of natural light are the ideal.
  • Consult an architect to create the optimal design and use of space.
  • Consider what is most valuable in your area. In dense urban cities, parking is difficult to find and expensive to purchase permits for - in these areas, a garage extension is a lucrative asset. In period properties with small rear kitchens, extending this space to create a generous family kitchen will make your home stand apart from the competition when you come to sell.

Alternatives to building an extension

If you are thinking about moving and know that an extension would add significant value to your property, but don't have the time or budget, you could consider applying for the planning permission.

Planning itself costs £206 for an extension, but the process itself can take time, particularly if redesigns are required. There are also the costs of contracting a designer or architect if needed.

However, a home with planning permission in place for an extension can be lucrative for buyers looking for opportunities to invest and add value. This process is a relatively fast and cheap alternative to building an extension, which could add immediate value to the saleable price of your property.

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Frequently asked questions

How much does an extra bedroom extension add to my property?

Typically, creating an extension to accommodate one double bedroom with an ensuite bathroom will add around 23% to the value of your home.

Remember that this is relative, and will depend on the living space within your property being able to correspond with the number of bedrooms on offer.

How much does the average extension cost in the UK?

With such a vast range of choices, it is difficult to arrive at an average. However, in the UK, the typical extension built in 2019-2020 cost £19,750.

What return on investment will I get from an extension?

Reviewing figures from Spring 2020, the average return on investment for an extension in the UK was a whopping 71%. The average profit generated by building an extension was £14,000.

The return often includes savings in energy efficiency and heating bills by incorporating assets into the extension, such as:

  • Solar panels
  • Triple glazing
  • Thermal insulation
  • Upgraded external security

Why are double-height extensions more profitable than single storeys?

One of the most significant cost elements in building an extension is the groundwork and foundations. These need to be dug and established regardless of the height of your extension.

The necessity of foundations means that, while it will cost more to build a double-height extension, the cost per m2 will be significantly less. You will pay the same amount to have the foundations dug and built for two storeys as you would for one.
If this creates an additional bedroom on your first floor, as well as extended living space on the ground floor, you could add significant value to your property.

What are the cost considerations in building an extension?

The cost of the building work itself is the central part of the budget, but there are other factors to consider and plan for:

  • Inconvenience - if you need to move out for a few weeks, or need to pay for things like temporary cooking equipment, keep in mind that even small extensions will usually take around three months to build and you should prepare for how to live around the disruption.
  • Finance costs - many homeowners remortgage or take our short-term financing to pay for their extensions. Make sure you understand the costs, and how the interest and arrangement fees will add to the budget for your expansion.
  • Professional fees - the main costs include architects fees, planning fees, valuers, Party Wall Surveyors and finance costs. Check that you know every cost involved before beginning work on your extension.

The necessity of foundations means that, while it will cost more to build a double-height extension, the cost per m2 will be significantly less. You will pay the same amount to have the foundations dug and built for two storeys as you would for one.

If this creates an additional bedroom on your first floor, as well as extended living space on the ground floor, you could add significant value to your property.

What is the ceiling price in my area?

The ceiling price is the maximum value of a home in a particular area, regardless of how well built it is and how much extension work has been carried out.

Most property buyers will look to buy the least modernised home since this is a more accessible opportunity to add value.

This trend means that speaking to estate agents to understand local property prices and the likely ceiling price is worthwhile before budgeting for a large extension to ensure that the investment will be beneficial.

Does it matter what type of extension I build?

It certainly does! Different extensions have different rules around planning permission, and some options will be far more lucrative in certain areas than in others.

For example, in city areas where street parking is scarce, and parking permits expensive, having a garage extension could be worth several times more than the cost to build.

If you have a period property with an empty side return, then utilising this space could add value without eating up any of your garden areas and impacting the value with a reduced outside space.

Looking to the future is worthwhile. Triple glazing typically costs £100 more per window than double-glazing - but you can start making savings on energy consumption reasonably quickly. If your property has an excellent energy efficiency rating, and well-installed triple glazing, this can increase its saleability overall, possibly well above the extra £100 per window to opt for the upgrade.

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