Find your home’s real value
Most of us have no idea there can be a vast difference between the value of our homes and the cost to rebuild them if disaster strikes
H ow much is your home worth? That’s easy – a local estate agent’s window or going online should give you a fairly good idea.
But it’s not the whole answer. For every property has two values, sometimes massively apart.
Besides the resale amount, there’s the value insurance companies want to cover the building itself. Depending on where you live, these can be almost the same or the insurance amount could be a fraction of the estate agent’s estimate.
Insurers are interested in “rebuild values” – the cost of restoring properties totally destroyed by fire or flood or explosion. It’s their bottom line.
According to Direct Line Insurance, typical homes in the North East of England have a rebuild value just two per cent under their market value. In Newcastle, the average threebedroom property costs £ 160,732 while the rebuilding value is £ 158,000.
At the other end of the scale, average three- bedroom properties in the London area go for £ 647,571 but rebuilding it would cost just £ 205,000.
Across the UK, the typical threebed home costs £ 277,608 while restoring it from rubble would cost £ 164,917 – around two thirds.
All homes have bricks, tiles, plasterwork, cabling, plumbing and heating systems. Those factors – plus the cost of clearing the site if a home is destroyed and the labour involved in rebuilding – add up to the insurance value.
Most of these cost similar amounts wherever you live – big builders’ merchants have the same catalogue prices for all their outlets. The only substantial cost difference is the workforce to restore the property – labour tends to be more expensive in London and the South East than in most other parts of the country.
The gap between the rebuild value and the estate agency estimate is due to how desirable the area is – that’s access to schools, hospitals, transport, countryside, shops and all the other items you look for when deciding where to buy – and the value of land, which can’t be destroyed.
To use the title of that TV series, it’s “Location, Location and Location”.
Direct Line says: “The public has little to no idea of rebuild costs, estimating it would cost an average £ 226,750 to restore a threebedroom house – 38% more than reality.”
Insurance firms are only interested in what it will cost to rebuild your home