A loft conversion could be the key to lifting the value of a home in the depressed housing market, according to a report from the Nationwide Building Society.
More space = more value
Increasing the size of a house can add significantly to its value. Enlarging a home’s floor space by 10% can add 5% to its price, or 7% for a detached house. Converting a loft into a bedroom or bathroom can hike the value by as much as 20%.
“Home improvements which increase total floor area, such as a loft conversion, are still typically a good way to add value,” concludes Nationwide’s report.
The reason why adding space also adds value is easy to understand. Larger properties are in greater demand and are associated with higher status. However, warns Nationwide, additional rooms must be properly planned and useable – just sticking on an extra room which is difficult to access may have limited impact on the home’s value.
Energy efficiency good for home prices
Other improvements can also increase a home’s value. Buyers now expect minimum standards of heating and energy efficiency: failing to meet these can knock significant amounts off what would otherwise be a home’s value.
If a home is one of the mere 9% that does not have central heating installed, a similar amount – 9% – is likely to be lost from its value. With energy certificates now required on all homes put on the market, poor ratings are also likely to damage the price.
Higher energy efficiency in modern homes may be a factor in the higher values that more recently constructed properties attract. While only 30% of all properties have one of the top – A to D – energy ratings, some 90% of homes built since 1996 have a high rating.
Jury out on solar
Nationwide says that while the installation of solar panels and wind turbines is unlikely to pay for itself quickly in terms of reduced energy costs, it is possible they may have a greater impact on a home’s value. But, it warns, it is too early to be sure about this.
Yet whatever a homeowner does to a home is likely to have much less impact on its value than where it is situated. The traditional estate agent’s mantra of ‘location, location, location’ holds as true today as ever.
Choose your neighbours
Homes in the most desirable regions attract significant premiums, as do localised areas of affluence. If other neighbours are struggling with their finances, property values fall by about 26% from what they might otherwise expect to achieve. But if the neighbours are prosperous professionals, the achievable price will rise by a stunning 47%.
Regional differences are also substantial. A ‘typical’ home that would sell for less than £134,000 in Wales would fetch something near to twice that amount – £250,000 – in London.
But homeowners can do much to increase their property’s value, even in a time of market weakness.
A buyer’s market
“In a buyer’s market, homeowners are keen to know which characteristics are likely to make their home relatively more attractive and which ones may detract from the price,” says Martin Gahbauer, chief economist at Nationwide.
“Over time, buyers’ expectations have changed and overall the general quality of property in terms of amenities is improving. Location is still the biggest factor affecting the value of property, and a house in the best neighbourhood can command a price nearly 50% higher than a similar house in an ‘average’ area.
“However, other characteristics also have a significant influence on the desirability, and thus price, of property. Extending a property to accommodate an extra bedroom can add around 11% to its price.”