Ever wondered what actually adds up to make a house worth what it is? Well, new research suggests that the actual building materials and land only make up around three fifths of a property’s value.
The research, conducted by Direct Line, analysed the difference between the cost of rebuilding a home and its market value, discovering that more than 40% of the value comes from things like local demand and:
The analysis also concluded that average three-bed house prices, covering twelve cities across the country, were approximately 60% higher than the estimated rebuild cost of a similar type property: £277,608 compared to £164,000.
We all know location is an important factor when it comes to bricks and mortar value, so Londoners might want to look away. In the capital a three bedroom home in some areas could cost just shy of £650,000 - more than three times the standard rebuild cost of £205,000. The difference between these two values, around £440,000, is more than the UK average house price!
At the opposite end of the scale, in Newcastle the rebuild cost is just 2% below the average cost of a three bedroom house.
Perhaps, unsurprisingly, additional analysis found that the people had very little knowledge as to what it would cost to rebuild their home.
Adults in Britain think it costs an average of £226,750 to rebuild three bed properties, 38% higher than in reality, no doubt influenced by the price they paid. What it also means is they may be over-estimating when purchasing insurance and paying out more than they need to.
This is really interesting data – and you know I love my stats – but it does make an important point - which is everyone should know the re-build cost of their home so they know how much extra they are paying for location etc and don’t overpay for buildings insurance.
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