Bricks and mortar account for only 59% of a property’s market value in the UK with factors such as local amenities, schools and public transport accounting for over two fifths, a new study has found.
Overall, the average sale value of a house is £114,000 more than its rebuild cost and the average person overestimates the rebuild cost by 38%, according to the analysis from Direct Line Select Premier Insurance.
Analysis of property prices for three bedroom homes across 12 major UK cities reveal that the average house price of £277,608 is 59% higher than the projected rebuild cost of a similar property, which is valued at £164,000.
It shows that London, Brighton and Bristol have the highest location premiums in the UK. In London home owners typically spend an average of over £647,000 for a three bedroom property, more than three times the average rebuild cost of £205,000.
Indeed, in the capital the property premium at £442,571 is in fact so vast, it is higher than the average market value of homes across the UK at 216%.
After London, Brighton has the second highest location premium at 139%, with residents paying more than double the estimated rebuild cost to purchase a property in the city. This is followed by Bristol, Edinburgh and Norwich, all of which have location premiums of 60% or higher.
The research also reveals that the public have little to no idea of the amount it would cost of rebuild their property, with British adults estimating it would cost an average of £226,750 to rebuild a three bedroom house, some 38% more than the actual cost.
As a result home owners could be using an inaccurate figure when buying home insurance and therefore increasing the cost of their building insurance unnecessarily.
‘Although people may be surprised by the amount of value placed on a property’s qualities beyond bricks and mortar, this analysis shows just how much intangible benefits such as; local amenities, location and transport links add to the price of a property,’ said Nick Brabham, head of Select Premier Insurance.
‘Wherever you live in the country and whatever the property premium on your home, it is vital that you value the rebuild cost of your property accurately. This will help ensure you are suitably covered especially if your property has bespoke features, if it’s listed or made of non-standard construction materials. For many, the impact of underinsurance is only realised when it’s too late, but this is preventable,’ he added.