BRITAIN is not moving. Although house prices are buoyant, estate agents are crying out for new properties to put on the market. So why is everyone staying put? Some experts put it down to the rash of home improvement programmes on television. Channel 4’s
Grand Designs is giving everyone big ideas. But the most important factor is the cost of buying and selling.
The tax cost is seen as particularly onerous. “Stamp duty is now so expensive that people are tending to improve rather than move, which has caused a real squeeze in the property market,” says Lulu Egerton, of the estate agent Lane Fox in London. Stamp duty rates start at 1 per cent for properties worth between £125,000 and £250,000, which makes life difficult for first-time buyers. Above £250,000, the rate jumps to 3 per cent, which means that the average property in London, which now costs £317,000 according to the Land Registry, comes with a stamp duty bill of £9,500. Over £500,000, the rate is 4 per cent.
Price and fee increases are also proving a drag on the market. “As people move up the housing ladder, the difference between property price bands becomes wider,” says Louise Cuming, head of mortgages at Moneysupermarket.com, the price comparison website. Some home loans now charge their fees as a percentage of the amount that you are borrowing. Once you add other fees and charges, moving becomes a very expensive undertaking. “The cost of moving to a house worth more than £500,000 — once you take into account stamp duty, solicitor’s fees, estate agent fees and removal costs — will be more than £25,000,” she says.
So if you are not prepared to move, the alternative is to improve. And improvements are getting rather more ambitious than simple loft conversions. Ms Egerton says: “Many people are looking instead at creative ways of expanding their existing properties, either by digging down to a basement, or in some cases creating a basement and a sub-basement, going out at the back with an extension or going up into a loft.”
Substantial renovations — such as digging out a basement — will require planning consent. Plus, they will be disruptive and may cost a great deal. So it is important to work out whether you are making the right improvements and whether you are adding value.
Russell Hill, of the estate agent Lane Fox, in Odiham, Hampshire, says that, if you have money to spend on just one room, make it the kitchen. “The key for improving to add value is the creation of a decent kitchen breakfast room. Even in the sticks, open-plan living is here to stay, and a spacious, well-planned kitchen can be easily updated when you come to sell.”
Philip Wooller, sales manager at Bective Leslie Marsh in Brook Green, West London, says improvements that would be a major hassle to a new purchaser are also worth doing. Putting in a bathroom — as opposed to adding a loft extension or creating a basement from scratch — is something that the purchaser can do with little trouble. He adds: “Going up, rather than down, is not as costly, causes less upheaval to the property and will generally make a better return.” The cost of digging down and adding a basement is about £100,000, but it will usually add only the spend plus half — or £150,000. This may seem like a good return, but a loft extension is better value. “A loft extension that costs around £50,000 will add approximately £100,000 to the property,” Mr Wooller says.
If adding value is the object of the exercise, it is crucial to get your budget right. The Royal Institution of Chartered Surveyors (RICS), which has recently published a book on the cost of home improvements, says that many people underestimate the cost of renovations, because television makeover programmes talk only about the cost of materials. They do not include labour or any advice you might need to get.
Unless you are considering very minor work, then getting the funding right is also very important. Moneysupermarket says that most people undertaking substantial renovations will be offered a home improvement loan by their lender. However, they would generally be much better off if they remortgaged to pay for the renovations instead. Moneysupermarket’s figures show that the average rate on a home improvement loan from a borrower’s existing lender could be more than two percentage points higher than a competitive mortgage rate.
INSIDEMOVE
WHAT’S IT GOING TO COST?
Kitchens: Removing existing units and installing new units, fittings, flooring, wall tiling and decoration — £11,200 to £25,000 for a terraced house, £31,000 to £120,000 for a detached home.
Bathrooms: Removing existing fittings and installing new sanitary fittings, flooring, wall tiling and decoration — from £4,100 to £10,000 for a terraced house, £6,200 to £40,000 for a detached house.
Conversion of an existing basement: Including the replacement of door, frame and staircase, plastering and painting walls, installing skirting and decorating, for a floor space of 20ft by 13ft — £9,500.
Loft conversions: Including straight-flight staircase, Velux windows, for a floor space of 20ft by 17ft — £14,000 to £18,000.
Conservatory: Including radiators, for a 20ft by 13ft space — £19,000 to £25,000.
Source: RICS Property Makeover Price Guide
INNERSPACE
NICOLA WILLIAMS was not particularly concerned about raising the value of her property when she decided on major renovations to her Victorian semi in Hampton Hill, Richmond upon Thames. “We decided to renovate because we wanted to live in this house for as long as possible. We weren’t trying to make a quick buck. We loved the house, we loved the area and we loved the street,” Ms Williams says. “I had looked around and had not found anything better.”
So she set about transforming the house that she and her family had already lived in for six years. “Basically we had it gutted and then started over. We took walls down, moved bathrooms around. When you look at the increase in square footage the change is minimal, but what we have done is completely reconfigure the space, so that the house now feels much more spacious.”
Nicola and her family moved out while most of the work was being carried out, so that pushed up costs. To pay for the build, the Williamses remortgaged from their Standard Life loan to an offset deal with Intelligent Finance. “The offset deal proved to be brilliant,” Nicola says, “because we only drew the funds down as we needed them.”
The work cost about £150,000; Nicola estimates it added roughly the same amount to the house’s value. More importantly, they ended up with their dream home.
The Property Makeover Price Guide: Organising and Budgeting for Home Improvers and Developers, £17.99, from www.ricsbooks.com or call 020-7695 1500.www.moneysupermarket.com
