Martin Gahbauer, Nationwide’s Chief Economist, said: "In a buyer’s market homeowners are keen to know which characteristics are likely to make their home relatively more attractive and which ones may detract from the price.
"Over time, buyers’ expectations have changed and overall the general quality of property in terms of amenities is improving.
"Location is still the biggest factor affecting the value of property, and a house in the best neighbourhood can command a price nearly 50% higher than a similar house in an ‘average’ area. However, other characteristics also have a significant influence on the desirability, and thus price, of property. For example, extending a property to accommodate an extra bedroom can add around 11% to its price."
Since 1984 the proportion of properties which are under-occupied has increased from 33% to 47%.
In housing terms, having more useable space is generally thought to be consistent with better quality accommodation and people are prepared to pay for it.
A 10% increase in floor space, all other things being equal, adds almost 5% to the price of a typical house. And, the bigger the property the more people are prepared to pay; a 10% increase in the floor area of a detached house adds almost 7% to the price even when keeping the number of bedrooms constant.
Adding a loft conversion with a bedroom and bathroom of 28m² can add about 20% to the value of a three bedroom, one bathroom house which translates to about £26,000.
Obviously, the more bedrooms a property has the bigger it is likely to be, but this is only partly due to the additional bedroom space.
A four-bedroom terraced house, for example, is likely to have two or more bathrooms, but it will also generally have more space elsewhere in the form of additional living space – perhaps larger bedrooms or kitchen – compared with a three bedroom terraced. This isn’t so surprising given that properties with more bedrooms would typically accommodate more people and thus require larger living rooms.
The old estate agent’s adage of location, location, location still holds true and has, in fact, become more important over time. The difference in price for a similar house in the most and least desirable areas was 72% in 1991, 80% in 2005 and is now 98%.
Of course the state that the property is in may also contribute to the difference in price and one might expect that the same size and type of property might be better maintained in a more desirable area – even if only due to peer pressure.
Assuming that the average area is a stereotypical suburban area populated by families in secure occupations, the premium and discounts attributable to other areas can be benchmarked against this. Compared to a typical house in the "average" area, a similar property in a "prosperous professionals" neighbourhood would command a 47% premium, around £75,000 in cash terms. At the other end of the spectrum, a similar property in a "hard pressed" area populated by families struggling to get by would carry a 26% discount (around £40,000) against the average property.
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