Cash-in on the attic
Homeowners in London are increasingly choosing to save the ‘capital cost’ of moving house and invest it in improving the space under their roof instead, as conditions in the housing market and the rising costs of moving house make staying put a more profitable option, according to new research released by Landmark Lofts.
The average price of a property in London has risen 19% in the last year alone, and now stands at £457,072. The new research by Dataloft, on behalf of Landmark Lofts, reveals that the enormous additional ‘capital outlay’ to purchase properties in key London boroughs such as Ealing, Hammersmith and Fulham, Richmond upon Thames and Wandsworth — all of which have experienced price growth exceeding the London average of 51% over the past five years — is putting bigger properties well out of reach of families who need to upsize. According to the Council of Mortgage Lenders, the value of loans to London home owners for re-mortgage in Q2 of this year has shot up by 22% (to £2.8bn) since Q2 2013, as they seek to improve rather than move.
In Richmond, the average price of a four bedroom house currently on the market is a staggering 82% (£503,288) higher than that of a three bedroom house. In Hammersmith and Fulham, while prices are only 24% higher for a four bedroom house, that means the price of that extra bedroom equates to £322,000. In Ealing, at 38% higher, the fourth bedroom would cost about £183,000. And that’s before you account for the additional costs of moving, including Stamp Duty, mortgage arrangement fees, solicitors’ fees for selling and buying, removals costs, survey fees (which alone can add on £3,000 to £6,500), estate agent’s sellers’ fees (commonly 1.5% of the property price) and any repairs or decoration that the new house requires.
The additional costs involved in upsizing from a three bedroom to a four bedroom house stand at £68,897 in Richmond, £80,779 in Ealing and Chiswick, and as much as £105,929 in Hammersmith and Fulham, prompting many homeowners to opt for loft conversions (at an average cost of £53,477) instead.
London’s leading loft conversion company Landmark Lofts is experiencing unprecedented demand for bespoke conversions in these areas with enquiries up by 250% year on year, as people increasingly see the value of adding extra room with the minimum of hassle.
“With the costs of moving going through the roof, it’s no wonder growing families or people looking for an office or guest bedroom are investing their money in loft conversions instead,” says James Gold, Founder and Director of Landmark Lofts. “It means they can not only add that extra room, to their own exact specifications, but usually a bathroom or ensuite too, lots of extra storage and incredibly valuable enhanced square footage for when they do eventually come to sell.”
What’s more, it’s easier than ever. “The updated planning regulations mean that having a loft conversion is nothing compared to the hassle of a house move,” Gold explains. “People are always amazed that the loft can add an open-plan area that replicates the entire footprint of the house — and with house prices and the associated costs rising the way they are right now, for the typical London family it’s not just a luxury, it’s a necessity.”
It doesn’t look like things are going to change any time soon. Despite measures that have been put in place to stem the rise in house prices — including April’s Mortgage Market Review bringing in stronger means testing — and the expected rise in interest rates, concern over the affordability of housing is growing, as a raft of indicators point to further price rises in the coming years: positive economic forecasts are predicting a move from recovery into expansion and growth, the GDP is up from 1.7% last year to 3.2% this year, and unemployment rates continue to fall.
The average house price in London (£457,072) is now perilously close to the £500,000 barrier that sees Stamp Duty Land Tax rise from 3% to 4%, adding at least £5,000 to the cost of buying a new home. This means a tax of at least £50,000 on a house over £1million (such as those in Hammersmith and Fulham). In fact, the amount being paid on Stamp Duty in the Capital is at a record high, with London accounting for 42% of the total paid on residential properties in 2013/2014 — even though only 15% of house purchases took place in the capital. A disproportionately high number of Londoners are now being slapped with the huge extra costs that were originally brought in to target the wealthy.
In Wandsworth, the average price of a semi-detached house was £1.03 million last year compared to £917,890 the previous year. Any potential buyer not only had to find an additional £120,000 for the house itself but the £15,000 extra Stamp Duty. In Ealing, the average semi had jumped in price by 21% in 12 months. When it comes to the extra bedroom factor, in all but one of the areas surveyed by Dataloft, the move from a three-bedroom house to four bedrooms pushed the Stamp Duty into a higher band, resulting in moving costs ranging from £67,694 in Willesden Green and Golders Green to £84,722 in Islington, Muswell Hill and Stoke Newington to the enormous £105,929 in Hammersmith and Fulham.
“What’s clear is that in the coming years, Londoners in need of space are likely to be going upstairs rather than up the street,” James Gold says. “They get all the benefits of extra room without having to leave home.”
For further information, visit landmark-lofts.com.