Move or improve?

Move or improve?

Soaring property prices and the prohibitive cost of relocating are preventing many people climbing the housing ladder. Now more and more of us are instead opting to extend our homes. Hannah Booth reports

Monday July 16, 2007
The Guardian


Thinking of moving house? Think again. The next rung of the housing ladder may have been within reach a few years ago, but it is becoming increasingly hard to upgrade to a larger property: the apparently unstoppable rise in house prices, the lack of decent properties, the sheer expense of moving house - from stamp duty to solicitors' fees - are making us question whether it is worth it. It is no surprise that a growing number of homeowners are deciding that enough is enough: we move house primarily to gain space; why not stay put, save on moving costs and spend the money on improving what we have?
Extending your home is typically a lengthy process of applying for planning permission for the smallest of alterations, and awaiting approval. But the government is aiming to cut red tape, making the process easier and faster. In May, it announced proposals to allow most loft and kitchen extensions without planning permission, provided they meet certain size criteria.
So why are we finding it so difficult to move house? According to the Halifax, the average costs are as follows: valuation, £300-£600; conveyancing, £400-£600; and estate agency fees, usually around 1-2% of the property's value. Then there's stamp duty: 1% on houses from £125,000 to £250,000; 3% for houses worth £250,000 to £500,000; and 4% for houses over £500,000. The average house price in the UK, according to the Halifax, is now £196,893; in London, £297,132: that's £1,969 in stamp duty (or nearly £9,000 on the London average). So, at the most conservative, we're spending £4,700 just to move (£12,700 in London).

It doesn't stop there. There is wasted money if a sale falls through and bridging loans if you have to pay two mortgages simultaneously. Your house may not fetch the asking price. You may end up having to offer more for the house you want, or resort to sealed bids. There is the cost of physically moving your belongings (depending on how far you're travelling and how much stuff you have, upwards of £300). In fact, research by Abbey suggests that factoring in these costs takes the total cost of moving to nearer £16,000 - and says the average homeowner then spends a further £6,000 in the first year doing up their property, furnishing and decorating it. That's £22,000 - ouch.

More importantly, as prices continue to rise, we're not getting significantly more for our money. "Moving up the ladder is very difficult," says Jeremy Leaf, an estate agent and also spokesman for the Royal Institute of Chartered Surveyors (RICS). "Often, people are looking to make two 'jumps' - a bigger home in a better area - which makes it doubly difficult. They're increasingly thinking, is it worth the effort? The leap between a three-bed and a four-bed house is particularly hard. Four-bed houses are popular, relatively rare and usually considerably larger and in better areas. And you're competing with people who are settled in the area, with good friends, schools, jobs, who are prepared to pay the extra."

The alternative? Spend the money on a loft conversion or extension. Aside from saving on moving expenses, you get to keep your neighbours (which may or may not be a good thing), your schools, and the vegetable patch you have worked so hard on. A growing number of us are doing just this. Planning applications have nearly doubled in the past 10 years, according to the government. In the past 12 months, says the Halifax, just 3% of home improvers converted a loft; next year, 10% are planning to do so.

"People can't afford to move these days," says Neil Yemm, director of Midlands-based loft specialist Main Pride Lofts. "Most want an extra bedroom and, increasingly, an office as so many work from home now. What my clients do is work out what they'd have to pay in stamp duty and costs if they were to move, and spend it on an extension instead."

The government's proposals are designed to improve the quality of extensions you can make without permission - ministers are concerned about the time involved in deciding minor, uncontroversial applications. At present, homeowners have to pay up to £1,000 to obtain planning permission for almost all rear and roof extensions, a process which can take between eight and 16 weeks. Under the proposals, no planning permission will be needed for these types of extensions if they have little impact - rather, there will be self-assessment or direct negotiation with a local authority to ensure extensions comply with height and depth restrictions. And there are no limits on the number of extensions you can build - under current law, if you have extended by 10%, you have used up your limits and must seek planning permission.

The average cost of an extension, according to RICS' Building Cost Information Service, is anything from £14,000 for a modest loft conversion to £50,000 for a large kitchen extension.

Lance Stock, who runs Barnet-based Stock Construction, usually allows £30,000-£35,000 for kitchen/dining room extensions and loft conversions on an average three-bed semi. "Loft conversions are more popular than garden extensions because you're often getting a third or fourth bedroom, and even a second bathroom - and that's more attractive when you eventually come to sell." He says people who convert their lofts can usually expect the value of their house to rise by two or three times the price of the extension. Costs rise if you employ an architect: on average, a bespoke kitchen or basement extension starts at around £40,000. You could equally spend £200,000 for a larger extension with a high-spec kitchen.

"The single biggest cost when considering an extension is VAT. Our clients often forget to factor it in - a quote always excludes VAT so it can come as a bit of a shock," says architect Alun Jones, whose practice, Dow Jones, has built several extensions. On a £40,000 extension, 17.5% VAT is £7,000. But you're adding value to your home. "You get more value for money by extending your property," he says. "Stamp duty is such a waste - particularly on expensive properties. On a house worth £750,000, you'd pay £30,000 - the cost of a loft conversion."

So is it worth it? "If an extension is well designed, yes, every time - it will always add more to the value of the house than what it cost, usually at least double what the extension cost," says architect Paul Archer. "But the cost must be proportional to the value of the house. You wouldn't spend £200,000 on a £150,000 house; and equally, you wouldn't spend £30,000 on a £2m property. But beware: a poorly designed extension may devalue a property."

Stock recently built a loft conversion in a three-bed semi in north London for £30,000 plus VAT, with an additional £5,000 spent on decorating (total cost, around £40,000). "My client had his house valued four weeks later, and it was worth £82,000 more. And that's a pretty standard uplift."

The proposals are stricter on loft extensions you can undertake without permission. The government is keen to reduce the visual impact of bulky dormer windows - they are one of the biggest causes for complaint between neighbours - by limiting their size. Under the new proposals, discreet extensions built below the ridge of the roof and away from the edge may not require permission - and conversions with no external changes, including skylights that open out, are allowed without planning permission.

"The proposed changes take into account the impact of building work, rather than being prescriptive for the sake of it," says a spokesman. "For example, how far buildings are from neighbouring properties, whether they drastically alter the look of a house, whether they are the appropriate size for the size of the house." Planning permission will, however, still be needed in certain cases - where they are larger than allowed, in listed buildings, and in conservation or protected areas. Final proposals should be published later this year with a view to being implemented next year.

But not everyone's happy. "For kitchens and conservatories, the proposals are good news," says Brian Berry, director of external affairs at the Federation of Master Builders. "But for anyone thinking of converting their loft, it's really bad news. The proposals essentially shrink the size of a permitted loft conversion, so you have to get planning permission anyway."

"Under the government's proposals, people will find that home renovation is harder, not easier, to achieve," agrees Jeremy Leaf of the RICS. "Requirements for loft conversions will make it difficult to create sufficient space for a new room, and will force people to apply for formal planning permission, which defeats the purpose."

"We appreciate those with a vested interest, such as builders, may be concerned," says a government spokesman. "But we're aiming for a balance between homeowners and their neighbours. People can extend their lofts, it's just that for larger schemes that may impact on others, they will have to seek planning permission."