What adds value to your home?

Issued - September 1999

Which factors really add value to your home and how much? Estate agents and surveyors will have their own opinions on what adds value, but from the Nationwide house price index we have identified an objective set of factors that determine the price of a property. Not surprisingly, location is a dominant factor but, the type of property, overall size, number of bedrooms, garage, and central heating also have an effect.

Neighbourhood watch

Although it is easy to say which part of the UK you live in, it is much harder to accurately classify the desirability and affluence of your neighbourhood relative to others. The classification of an area is subjective, can change with fashion or other social trends, and can vary dramatically within a few square miles. Our house price index takes account of these differences by using the ACORN^tm categorisation of neighbourhood types. For example, a property in what ACORN^tm calls a "village of wealthy commuters" could be worth around 30% more than if it was located in an "established home owning area". Alternatively, if the same property resided in an "overcrowded, high unemployment area" its price could be around 30% less.

Figure 1: House values for identical houses, in identical neighbourhoods, but in different parts of the UK. All of the prices in this example are relative to a £150,000 house in London.

Location, location, location

It's not just your neighbourhood that affects the value of your house. Figure 1 shows how identical properties can change in value between different regions, i.e. the same style and size of house, in the same type of area, but in different regions of the UK. For example if a house in London was sold, and the owner moved to an identical house in the same type of neighbourhood in Yorkshire & Humberside, they could expect to pay 60% less.

An air of detachment

Whilst location will tend to dominate the value of a property, this is by no means the end of the story. Figure 2 shows the potential range in value of a property when just changing it's type, leaving all other factors the same. For example, if a semi-detached property was sold, and a detached property the same size, with all the same features, in the same area was bought, it could cost 14% more.

Decorative Image: UK Property Type Graph

Figure 2: The potential value of a property if only the property type is changed. All prices in this example are relative to a £70,000 detached bungalow.

Although at face value a little surprising, the rarity of detached bungalows means that a substantial premium must be paid over other property types. For example, when selling the UK’s most common type of property, a semi-detached house, a detached bungalow with all the same features could secure a price some 17% higher.

Bedroom antics

Obviously, the number of bedrooms is a key issue for property value. However, when increasing the number of bedrooms the value added is limited by the floor space available. To further increase the value, more floor area must be added. For instance, simply increasing the number of bedrooms may in some cases actually reduce the value of a property, since some people may value fewer larger bedrooms. For the country as a whole, if a 2-bedroom property has a third bedroom added, the value of the house may only increase by about 3%. In contrast, if this bedroom was added as an extension, approximately 100 square feet in size, the value of the house would rise more dramatically, by around 8% in total.

The convenience of a second bathroom

As common sense would suggest, prices are higher for properties with more bathrooms. For two identical properties in the same street, an extra bathroom could add as much as 9% to the price. However, the more bedrooms a property has, the greater the value that is contributed by a second bathroom. For example, in a two bedroom house a second bathroom would be less desirable than in a five bedroom house.

Garage
Single	Double
6%	15%

Table 1: The potential increase in value of a property if a garage is added.

Home improvements

When improving a property, two avenues that are often considered are adding, or enlarging a garage, and adding central heating. In table 1, it can be seen that adding a double garage, rather than a single one, more than doubles the contribution it makes to the value of a property. Again this will vary between different regions. For example, because of the shortage of space and the price of land a garage will add more to a property in London than one in Scotland.

Central Heating
Part	Full
7%	15%

Table 2: The potential increase in value of a property if a central heating system is added.

New or second hand?

Despite the recent fashionable trend towards period properties, buyers are still willing to pay a substantial premium for the benefit of living in a new home. This is likely to reflect that new properties have warranties, and will tend to incorporate the most modern building technology. New properties can be expected to command a price that is around 7% higher than an equivalent second hand property. However, although this is true for the UK as a whole there will inevitably be exceptions. In rural locations good quality period properties are likely to be the most sort after, and would therefore generate a premium over newer houses.

This article has briefly assessed which factors add value to your home. Although many are well known, we have tried to provide a feel for the relative importance of individual factors. As shown above, a property worth £150,000 because it resides in London may only be worth £75,000 if located in Scotland. Moreover, you may have to pay on average 27% more to move from a terraced house to a detached bungalow with the same number of bedrooms. However, whilst our estimates provide a good idea of the most important factors that add value to your home, it should always be borne in mind that local housing market conditions and the "quality" of the property (which are difficult to quantify) will also have an impact.

The figures quoted should only be used as a guide, Nationwide is unable to produce individual property valuations on the basis of this data.

*All figures are based on a two years data up to the end of Q2 1999, with the exception of the regional figures. These are based a single years data up to Q2 1999.

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