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Home extensions can add significant value to the average home

7th September 2012 Print

Adding an extension or a loft conversion to your home could increase its value by almost a quarter, according to research by Nationwide.  In addition, the Society has changed its mortgage proposition for further advances, putting borrowers into an excellent position to take advantage of the new relaxed planning laws announced by the Government.

While many other lenders charge higher rates on a limited range of products for further advances, Nationwide offers access to its full range of mortgage deals with a 0.10% discount for existing customers. This brings its rates down to as low as 3.19% for a two-year fixed rate (60% LTV).  Later this month, borrowers who use a FlexAccount as their main current account will also have access to Nationwide's four-year fixed rate Flexclusive mortgage from 2.99% (60% LTV) and five-year tracker Flexclusive mortgage from 3.49% (70% LTV) for further borrowing.

Nationwide's House Price Index Special Report looked at the value of improvements made to an average three-bedroom house. Nationwide found:

Creating an extra bathroom could add 6% to the value

Adding another double bedroom can push up the value by 12%

Building an extension or loft-conversion to create a double bedroom and en-suite bathroom could add 23% to the value

Increasing floor space by 10% can add 5% to the average value

The price for building an extension can cost, on average, around £1,000 per m2 or £23,000 for a single storey and £76,000 for a double storey.

For people living in more expensive parts of the UK, such as London, where moving from a three bedroom to a four bedroom property carries a £90,000 premium on average, extending may well be the only solution for the growing family.

Commenting on the Special Report, Robert Gardner, Nationwide's Chief Economist, said: "With housing market demand still very weak, increasing numbers of homeowners may opt to improve rather than move. Our research assesses the factors that affect the value of homes, and the potential to add value.

"Having more useable space is generally thought to be consistent with better quality accommodation and people are prepared to pay for it. A 10% increase in floor space, other things equal, adds 5% to the price of a typical house, while adding space equivalent to the size of a double bedroom to a two bedroom house can add around 12% to its value.

"A second bathroom is also a favourite with homeowners and our research shows that creating an additional bathroom can add 6% to the value of the average house. Homeowners that add a loft conversion or extension incorporating a double bedroom and a bathroom can add about 23% to the value of an existing three bedroom, one bathroom house."

Tracie Pearce, head of mortgages at Nationwide, explains: "The Government's announcement today will no doubt be welcome news for homeowners who are attracted to the idea of improving their property by adding both space and value rather than face the extra costs and expense of moving to somewhere bigger. We believe our new further advance rates are among the most competitive in the market place.  That, combined with the new, relaxed planning laws, could make a home extension an affordable solution."