Does an extension really add value to your home anymore?

builder with a hammer in his hands breaks the cement wall The builder is dressed in a protective suit and helmet
With the costs of raw materials and labour rising, the cost of doing a house extension may not yield a greater return on investment as before.

With the increased cost of labour and materials, we look at whether doing an extension is still cost-effective.

Why is it currently so expensive to do an extension?

The last year has seen the price of home improvements skyrocket. According to the UK Department for Business, Energy and Industrial Strategy (BEIS), the average cost of materials was 23.5 per cent higher in August 2021 than in August 2020. In the same period, Construction News reported that steel and timber prices had shot up by around 74 per cent. This was as a result of the increase in global shipping prices and demand on supplies.

Add to this a labour shortage, driven by skilled tradespeople preferring to work in the EU over the UK, and the fact that lockdown has led to an increase in people wanting to improve their home, and you can see why the cost of getting an extension has gone up all over the country. But is this just a temporary blip?

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"My personal prediction is that the prices will have to go down, not by a lot, and not to pre-Covid values," says property expert Tarun Singh of Shetson Property Developments Ltd. "We've already received emails from some timber suppliers that prices will reduce by 8% in the new year (these are the same suppliers that hiked them up by 40% during the year)."

Do some extensions add more ‘value’ than others?

Extensions come in all shapes and sizes, from loft conversions to side returns, and how much they cost, and the value they add, can vary significantly. Andrew Tucker, from property consultants Bidwells, says that you must ask yourself a few questions before deciding on whether and how to extend:

  • How much space do you have to extend?

  • Will you still have enough outside space and garden?

  • If you are detached or semi-detached, will an extension still provide side access?

  • Do you require planning permission, or can you extend under permitted development rights?

  • One or two storeys? A one storey extension is generally more cost-effective.

Even with the increase in costs, Graham Bauer, Director of estate agents Neilson & Bauer, believes an extension is still worth doing: "Ultimately creating more square footage, such as transforming a bungalow into a house, will see the largest uplift. That said, as more people are spending more time at home, a stunning kitchen diner with a side return will always create the wow factor and make the property very appealing to the market."

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Tarun Singh suggests being clever with your layout if you want to get a good return when you sell: "Make the extension as structurally open as possible and use non-load bearing walls for partitions; that way there is flexibility if you or the next owner ever need to change the room size internally."

How can you find out the value an extension will add?

With the price of whatever extension you do increasing, you need to be sure that the outlay is worth the result, whether that’s financial, when you sell on, or with the use your family will get from the additional space. The latter is something that only you yourself can decide but a little research will answer the former.

"We recommend having an open conversation with your local estate agent," says Graham Bauer. "They will be able to give you the ceiling price of the street, your home’s current value and projected value once the works have been completed."

Tarun Singh suggests doing some research yourself too. "Look at similar properties in your area that have had it done and see what they have sold for," he says. "It’s highly unlikely that you are the only one who has thought about extending your house in that way in your area and, if it is, it may mean that it’s not cost-effective."

Doing an extension versus a ‘facelift’

If the motivation behind an extension is to increase the value of your home when you sell, it might be worth considering refurbishing instead. "A facelift of your property certainly can add value. Presentation is everything," says Andrew Tucker.

The decision of extension versus facelift might be decided for you by the amount of time you have, plus your appetite for large amounts of work and disruption. "A simple facelift can be done in weeks, however, an extension can take months, so it is a balancing act. The majority of the time an extension will be more profitable than a facelift," advises Tarun Singh.

While our experts agree that, most of the time, increasing square footage is a savvy financial move, Andrew Tucker reminds us: "Adding an extension to your home should not just be about adding value for the future, but also how it will improve the use of your home and the space you live in!"

Watch: Why are house prices rising?