‘I’ve Made £500,000 By Building A Third Storey On My Home’
The Government is making it easier for people like Robert Wilson, a fifty-something from Clapham, to profit by building their homes upwards.
For Robert Wilson from Clapham, south London, building his home upwards has been one of the best investments he’s ever made.
Mr Wilson, 55, was amazed to discover, when he had his home valued recently, that the third floor he added to the property in 2013 had added £600,000 to its value. The new storey cost £96,000, leaving him with a £500,000-plus gain.
More home owners are expected to make similar home improvements under a promised relaxation of the planning laws (see below).
Mr Wilson, who lives alone with his dog, Doodle, said: “When I first bought this place it only had two bedrooms and wasn’t really big enough. So I decided to invest in an extension.
“My first thought was to do a loft conversion, but the planners I hired said I’d add more value by adding an extra floor on to the house. So that was that.
“It took about a year and a half in total to complete, much longer than I thought. I had a few disagreements with the builders and they walked out on me. Probably my biggest mistake was underestimating the cost, so they had very different ideas to me.”
Mr Wilson moved out of the property for around a year while the builders were in. This cost him about £1,600 a month in rent, or about £19,000 in total on top of the £96,000 cost of the work.
Could you profit from adding an extra floor?
There’s a simple way to work out if extending your home upwards is likely to make you money.
According to Michael Holmes, a spokesman for the London Homebuilding & Renovating Show, the cost of adding a floor to your home or buy-to-let property will typically be between £2,640 and £3,840 per square metre. This means that your property needs to be worth more than this on a per-square-metre basis for you to turn a profit.
To give you an idea, the average value per square metre for residential housing in Britain was £2,330 in 2014. But in Kensington & Chelsea, the most expensive borough in London, it was £10,854. Extending property in areas where house prices were strongly rising, as in the case of Robert Wilson, would help improve potential returns, Mr Holmes said.
You should also ensure that you take into account the cost of alternative accommodation while the builders are at work, or the loss of rental income if it’s a buy-to-let property that you’re considering extending.
A sensible plan is to price in the cost of leaving the property empty for at least six months, plus some leeway for unexpected delays. Another smart move is to hire an architect to design the extension to look like part of the original house. A builder is less likely to focus on design.
Mr Holmes said doing this would add roughly 5pc to your building costs, but should more than pay for itself through the value it would add to the property.
The new planning rules
Ambitious home owners who want to expand their properties by building upwards have for a long time come up against a stubborn barrier: “Nimbys”.
These are residents or local politicians who oppose new development because they fear it might ruin the character and aesthetic quality of their area – the acronym stands for Not In My Back Yard.
But in his Budget last month, George Osborne, the Chancellor, declared war on the Nimbys. He promised to introduce new laws to allow thousands of people to build extra storeys on to their properties without the need for planning permission from the local council.
The new regime will allow anyone who owns residential property in Greater London to build up to the level of their neighbour’s property. It won’t apply to those who live in a flat or maisonette. You will also require neighbours’ approval to carry out the work.
It is not known when the new rules will take effect.
Currently there are limited rights to build extra storeys at the back of buildings. The Government has already relaxed planning laws on house extensions and the right to convert shops into houses, but this latest move on so-called “permitted development rights” is the latest step in the drive to increase housing density.
If you live in a house you are already allowed to extend the loft by 50 cubic metres, as long as the property doesn’t face a public highway. This allowance is reduced to 40 cubic metres for a semi-detached or terraced house.
Written By Katie Morley