Should I extend my home or move?
The following is taken from a real conversation with a current RHJB Client, who, when we first met, had in their own admission an un-informed idea on spending for their project. Simply saying they felt “£300k was reasonable”. Armed with this notion, we were able to walk them through the following simplified overview, identifying realistic figures on which to assess their options, to establish if moving financially answered their problem, or indeed if staying in their home, extending, and renovating would meet their true goals and serve them better. The following is a brief insight into the start of their journey:
At this point, they are the proud owners of a 4-bedroom detached property in an affluent area, their home is currently worth approximately £1.1 million, and they have a degree of equity in the house. They are seeking to extend the house, increasing the floor area by approximately 35% whilst renovating the rest of the existing home. (Which was all in principle achievable in planning policy terms).
Any research into possible costings needs to be accurate, and professional, based on current market conditions for the region and location of the project. All too often, false expectations are created via TV shows, where complimentary product placement and advertising drive down the perceived cost of the project. This serves the narrative of the program, for example, “The 100k house”, which wouldn’t be as catchy if it were called “£130k-ish give or take furniture, fees etc House”!
Beyond our usual exploratory questions about what they as a family were looking for from their home, the spaces they wished to create, the feel and soul that would be embodied and the memories that they would make, we asked the following:
“If you were to find a house nearby that was 35% bigger, how much would this cost?”, having already undertaken some research via Rightmove, they replied that it would be in the order of “£1.6 million”.
So, with nothing more than the exchange of a few sentences, we had established that to get this additional space on a house locally by moving, they would need to find an additional £500k. However, this isn’t the full picture. If they were going to move, they would need to factor in Stamp duty. At the time of writing this would effectively be in the order of £103k alone, going direct to the government.
Plus, you can’t stop there, there are the associated estate agent fees, legal costs, and removal fees all to be considered, and a presumption the new house is perfect for your needs when you move in. What is the likelihood this new house would require a renovation, a new kitchen, bathrooms etc? Even without the potential cost of decoration or renovation, the cost of moving is more in the region of £650k to essentially gain 35% more space. Of course, subject to finances, moving may be a practical option to meet other needs or desires. However, let’s return to this family’s existing home. Even if their spending reached £500k, this would still be a significant saving on moving, and importantly they would be the proud owners of a home finished entirely to their high standards.
Now the above example is simply to demonstrate that there needs to be a realistic view taken when considering how much you wish to spend on your home. There are other influential factors, not least the availability of funds for a project and the specific brief that is to be addressed. However, it is important to understand that when comparing the opportunity cost of investing in your current home and that of moving, the details matter and have a significant impact on your thought process and aspirations.
In the case of our clients, they loved their current location and had no real desire to move, and with a now informed perspective on the opportunity cost of moving opted to increase their budget, and invest in their existing home. We were subsequently able to undertake detailed feasibility and concept design with them, to establish what were the most important aspects of their brief and how we could help drive the project forward with them.
Check out another of our posts ‘Will an extension add value to my house?’, which is a common question we are asked. Coming soon is our answer to ‘Will I out price my street?’