The Money-Saving Move: Home Improvements on the Rise

In light of the UK housing market’s ongoing challenges and uncertainties, including fluctuating property prices, limited housing supply, and rising moving costs, a growing number of homeowners are turning to home improvement as an alternative to selling up and moving home. From a wide range of projects such as building renovations, extensions, and room conversions, over the past few years, there has been a notable increase in the demand for home improvement loans, reflecting homeowners’ growing interest in upgrading their existing properties.

Analysis of Google Search Trend data from April 2022 to April 2023 reveals the UK has seen a remarkable surge in interest in home improvement projects. In just one year, the search volume has grown by an impressive 59%, emphasising the increasing trend among UK residents to invest in enhancing their living spaces.

Recent data from the Finance & Leasing Association (FLA) demonstrates a general upward trend in the total amount and number of home improvement loan agreements from January 2021 to February 2023. The total amount of home improvement loans has increased from £11m in January 2021 to £14m in February 2023. Simultaneously, the number of home improvement loan agreements has grown from 232 in January 2021 to 296 in February 2023.

Property prices and interest rates have been increasing rapidly over the past two years and buying property is no longer the most cost-effective option. Amidst the ever-changing economic landscape, property prices have witnessed a significant surge, making homeownership increasingly challenging for many. Additionally, the past year has seen a 240% increase in the Bank of England base rate in the last 12 months, further complicating the decision to invest in the housing market.

For people who already have a mortgage, higher rates mean their monthly payments may get bigger, especially if they have a certain kind of mortgage called an adjustable-rate mortgage. It’s important for them to think about their budget and maybe consider other options, like refinancing their mortgage to a fixed rate.

For potential homebuyers, higher interest rates make it more expensive to borrow money. This means they might have to save more money, wait to buy a house, or look for a cheaper one. It can also be harder to get approved for a loan when interest rates are higher. Because of this, people might choose a fixed-rate mortgage, which keeps their payment the same over time, instead of a variable-rate.

The increased demand for home improvement loans indicates that more homeowners are investing in enhancing their properties rather than navigating the uncertainties and financial risks associated with buying and selling in the property market.

One of the most significant advantages of renovation is its cost-effectiveness compared to buying and selling property. According to Zoopla, the average estate agent commission in the UK is between 1%-3.5% of the sale price, meaning that on a £300,000 home, homeowners would pay up to £10,500 in commissions alone.

Due to its effects on home affordability and market dynamics, stamp duty, a tax on real estate transactions, has drawn increasing attention. Stamp duty makes it harder for first-time homebuyers and those with limited resources to enter the property market, as it adds a significant expense to the purchase price. Depending on the value of the property purchased, the date of the acquisition, and whether you own several homes, the stamp duty rate ranges from 5% to 12% of the purchase price.

After two years in lockdown and the growth of remote working, many homeowners in 2023 are looking to reevaluate their living spaces, prompting them to invest in more extensive home improvements to accommodate home offices, gyms, or outdoor living spaces. This shift in lifestyle and work habits is likely contributing to the growing ambition of home improvement projects.

Home improvement loans have become an increasingly popular option for UK homeowners looking to develop their properties and save money on buying and selling. Data from the FLA shows that the average advance for a Homeowner Loan in February 2023 was £45,679. According to Pepper Money, the average property value of people that were looking for loans was £309,548.51, while the average loan value was £40,618.86. By taking advantage of home improvement loans, homeowners can not only save money but also create a more comfortable and functional home environment tailored to their needs and preferences. Investing in home improvements can lead to significant financial benefits in the long run, both in terms of increased property value and reduced costs associated with moving.

The second most prevalent motivation for homeowners to invest in home improvements is to enhance their property’s value, with 18% of respondents expressing this as their primary reason in a recent survey. In an uncertain housing market, many individuals recognise the potential of well-executed renovations and upgrades to boost the market value of their homes. By focusing on strategic improvements, homeowners can potentially reap financial benefits and increased returns on investment when it comes time to sell, making property value enhancement an appealing and practical goal for those undertaking home improvement projects.

Looking at search demand we have ranked the top 10 most sought-after home improvement projects, taking into account average cost and added value to reveal what home improvements are worthwhile on your property in 2023. 

Rank	Project	Average Search Demand per month	Cost Range	Added Value
1	Loft conversion	23,200	£20,000 to £49,000	20%
2	Patio doors to garden	20,000	£500 to £2,500	3-5%
3	Walk-in wardrobes	13,000	£8,550	5-10%
4	Solar panels	11,000	£7,860	4%
5	New kitchens	7,300	£15,000 to £20,000	10%
6	Downstairs toilet	7,000	£2,450	5%
7	New bathroom	4,300	£5,000	4-5%
8	Utility room	4,400	£6,075 to £10,125	5%
9	Ensuite bathroom	3,700	£3,000 to £7,000	4-5%
10	New windows	3,100	£1,300	10%
11	Kitchen extension	2,140	£25,000  to £35,000	5-8%
12	Conservatory extension	1,400	£6,250 to £9,750	5%
13	Landscaped garden	1,300	£3,850 to £15,400	20%

 

1. Loft conversion

Search demand: 23,200, Cost: £20,000 to £49,000; Added value: 10%-20%

A loft conversion involves transforming the unused attic space of a home into a functional living area, such as a bedroom, office, or entertainment room. This project can add significant value to a property and maximise the use of available space without changing the building’s footprint.

2. Patio doors to the garden:

Search demand: 20,000 per month, Cost – £500 to £2,500; Added value – 3-5%

Patio doors create a seamless connection between indoor and outdoor living spaces, allowing natural light to flow into your home and providing easy access to your garden. This project may involve installing sliding or French doors.

3. Walk-in wardrobe:

Search demand: 13,000 per month, Cost – £8,550; Added value – up to 5-10%

A walk-in wardrobe provides a dedicated and organised space for clothing and accessories. This project typically involves designing and installing custom shelving, drawers, and hanging rods.

4. Solar panels:

Search demand: 11,000 per month, Cost – A three-bedroom house’s solar panels will typically cost £7,860; Added value – 4%

Solar panels are a sustainable and environmentally friendly way to generate electricity for your home. Installing solar panels can help reduce energy bills and may be eligible for government incentives.

5. New kitchen:

Search demand: 7,300 per month, Cost – £15,000 to £20,000; Added value – 10%

A new kitchen can significantly improve the overall aesthetic and functionality of a home. This renovation may involve installing new cabinets, countertops, flooring, appliances, and lighting.

6. Downstairs toilet:

Search demand: 7,000 per month, Cost – £2,450; Added value – 5%

Adding a downstairs toilet provides additional convenience for guests and family members. This project typically includes installing a new toilet, sink, and necessary plumbing.

7. New bathroom:

Search demand: 4,300 per month, Cost – £5,000; Added value – 4-5%

A new bathroom can modernise your home and improve its functionality. This renovation may involve installing new fixtures, such as a bathtub, shower, toilet, and sink, as well as new flooring and tiling.

8. Utility room:

Search demand: 4,400 per month, Cost – £6,075 to £10,125.; Added value – 5%

A utility room provides a dedicated space for laundry and storage, helping to keep the rest of the home organised. This project may involve installing cabinets, countertops, a sink, and appliances such as a washer and dryer.

9. Ensuite bathroom:

Search demand: 3,700 per month, Cost – £3,000 to £7,000; Added value – 4-5%

An ensuite bathroom is a private bathroom connected to a bedroom, offering privacy and convenience. This renovation may involve installing a shower, bathtub, toilet, sink, plumbing, and tiling.

10. New windows:

Search demand: 3,100 per month, Cost – £1,300; Added value – 10%

New windows can improve your home’s energy efficiency, security, and aesthetic appeal. This project involves replacing old windows with new, energy-efficient models.

11. Kitchen extension

Search demand: 2,140; Cost: £25,000 to £35,000; Added value: 5-8%

The extension may involve building an addition to the home, knocking down interior walls, or reconfiguring the existing space. A well-designed kitchen extension can significantly increase a property’s value and improve your quality of life.

12. Conservatory extension

Search demand: 1,400; Cost: £6,250 to £9,750; Added value: 5%

This type of extension can enhance a property’s aesthetic appeal and increase its value, while also providing an energy-efficient, comfortable space for year-round enjoyment.

13. Landscaped garden:

Search demand: 1,300 per month, Cost – £3,850 to £15,400; Added value – 20%

A well-designed and maintained garden can significantly increase a property’s curb appeal, providing an attractive and functional outdoor living space for relaxation and entertainment. 

Moving vs Home Improvement

Moving costs have risen in recent years, partly as a result of higher borrowing costs and rising living costs. Homeowners may find it challenging to navigate the housing market and pay for the many moving expenses, such as stamp duty, legal fees, and estate agency commissions, as a result of these economic challenges. Homeowners may have problems finding a new home that meets their needs and their budget due to the limited housing supply and increasing housing market demand. As a result, many people are considering various options, such as making home improvements, to better their current living conditions and avoid the expenditures associated with moving.

Pros of investing in home improvements:

• Cost-effective: Home improvements are often more affordable than moving to a new house, allowing homeowners to save on various expenses like stamp duty, legal fees, and estate agent commissions.
• Customization: Homeowners can tailor their living spaces to suit their preferences and needs, creating an ideal environment without having to search for a new property.
• Increased property value: Investing in home improvements can increase the value of the property, making it a more attractive option for potential buyers if the homeowner decides to sell in the future.

Cons of home improvements:

• One of the most significant disadvantages of home improvement is the potential financial burden. Renovation projects can be expensive, and costs can quickly spiral out of control if not managed carefully. It’s essential to create a detailed budget and contingency plan to avoid financial strain.
• While home improvements are generally intended to increase the value of a property, some projects may not yield the desired return on investment. Over-improving a property, choosing unpopular design trends, or poor-quality workmanship can all lead to a decrease in home value.
• The extent of the project will determine how much your daily life will be disrupted by house upgrades. This can include having limited access to particular rooms or utilities for a while or even having to depart the property temporarily.

Ryan McGraph, Second Charge Sales Director at Pepper Money comments, “ Home improvements can be a smart investment for homeowners in the current housing market. With careful planning, budgeting, and the right financing options, homeowners can transform their properties into more valuable, functional, and desirable living spaces. By doing so, they not only improve their quality of life but also contribute to a more sustainable and financially responsible approach to property ownership in the UK.”