Five things to consider when renovating or extending a home

Thinking about making home improvements? Our partner, Hiscox, lists the most important things you need to think about before doing so.

An extension to a home under construction
Photograph: Tracie Louise

The pandemic has caused a dramatic shift in the UK property market, with home-working leading to people needing more space, as well as less emphasis on being near the office.

The first half of 2021 saw record numbers of people moving house, according to figures released by Halifax, with London and the Southeast seeing a 165% increase in home moving.

An increase in home moving also leads to an increase in renovations and extensions, with buyers keen to make their mark on their new properties. But such work is costly and time-consuming, and there are several pitfalls that homeowners need to be aware of.

1. Will the surging prices of the last two years continue, or will rate rises take the heat out of the market?

Many predicted the tapering of the stamp duty holiday last summer and the withdrawal of furlough would take the heat out of the housing market, yet demand continued to surge as 2022 began.

According to Halifax, the price of the average UK home in January 2022 was £276,759, up £24,500 in 12 months. With a lack of supply in the market and many people still eager to buy, prices look like they are remaining high for the foreseeable future.

Yet things might be about to change. A cost-of-living crisis is hitting the UK economy, with inflation currently at a 30-year high of 5.4%. As a result, the Bank of England raised interest rates to 0.5%, a second consecutive rise.

Many predict the era of low interest rates enjoyed by many advanced economies is about to end, and rates will steadily climb over the course of this year to ward off inflation.

2. Continuing shortage of builders and materials, so finding the right tradespeople is harder

New homeowners will typically want to carry out work on their properties, but the market is proving difficult to navigate.

A shortage of builders – largely because of Brexit and the pandemic – has led to an increase in competition for work, pushing up prices, while supply chain issues have pushed up the price of materials.

According to the Federation of Master Builders’ (FMB) State of Trade Survey Q4 2021, 95% of members said material costs had risen during the quarter, with 91% expecting costs to go up again at the start of 2022.

As a result, 74% of members had put their prices up. At the same 43% and 41% of respondents said they were struggling to hire carpenters and bricklayers respectively.

This trend has been going on for some time. A survey last June by IHS Markit and the Chartered Institute of Purchasing Supply revealed that many respondents were paying significantly more for raw materials, leading to the overall rate of input price inflation reaching its highest point in 24 years.

Sedgwick also reported a double-digit price increase on materials such as timber (+61%), structural timber (+45%) uPVC windows (+18%) and radiators (+10%) between June and September 2021.

Timber is among the materials that have suffered the most severe shortages in supply and therefore has seen one of the largest price spikes.

With such a scarcity of builders, some might be tempted to pick ones that are available quicker. But it may pay to be patient.

By thoroughly researching builders, either through online recommendation platforms or trusted recommendations of tradespeople within the industry, homeowners can save a lot of stress in the long run.

Concern over the quality of building work is apparent within the industry. The FMB say that 86% of members want the Government to introduce a mandatory licensing regime to push up standards in the industry.

3. The way we work has changed forever, and so have our homes

Although coronavirus restrictions have completely eased, the way in which people work does not look like going back to what it was at the start of 2019.

Few workers now expect to be rigidly spending five days a week commuting into their offices. According to a recent global EY survey, 54% of employees say they would quit unless given flexible working arrangements.

With flexible working now looking like a permanent feature of people’s working lives, investing in the home to make it a suitable working environment is becoming more and more popular.

People with the space in their gardens are increasingly building garden rooms that provide them with a quiet working environment a few feet away from the main house. While they can be expensive, they also add to the value of properties.

According to Housebuilder and Developer, they could add 5% to the value of a house, while other estimates suggest the value-added would be around 1.5x the cost of installation.

4. Choose work that will maximise the value of your home

The reason for major investments in the home can be varied. It could be for an extension that creates more rooms or merely a renovation that improves the living space.

Yet, just because some work costs a lot, doesn’t mean it will add a similar amount in value to the property.

For example, a side return extension is popular with many homeowners seeking to create larger communal areas, such as kitchens.

These can cost up to £65,000, according to Checkatrade, and take around four months to do. And at the same time, they will disrupt the living space of a house. According to Homebuilding & Renovating, they will add around 10-15% to the value of a property.

By comparison, a loft extension typically costs around £40,000, say Checkatrade, and takes between six-10 weeks. The work is also relatively unobtrusive and could add around 20% in value to the property, according to Nationwide.

5. Renovations and extensions are expensive, and therefore risky

Major property work comes with considerable risks. Work can overrun or the costs could spiral.

Uncertainty over inflation and supply chain issues are likely to continue this year, and so materials and labour will prove hard to plan for. At the same time, unforeseen problems could arise, such as flooding, damage, or even total collapse.

Research by Hiscox shows that the cost of an average property claim in 2021 was £20,000 while building work was ongoing.

While not every job will result in a claim, it would be prudent for homeowners planning major work to their properties to ensure they have some form of building work cover as part of their home insurance policy.

Hiscox Home Insurance includes cover for renovation and extension projects up to £75,000 as standard, protecting your existing home, materials and liabilities and any new structure.

Hiscox home insurance

Law Society members save 12.5% on Hiscox home insurance.

Find out more by visiting Hiscox's offer page or calling 0800 840 2337 to get a quote.

Hiscox phone lines are open Monday to Friday, 8:30am to 5:30pm, and closed Saturdays, Sundays and Bank Holidays.

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