Average house is worth £114,000 more than its rebuild cost

Published by Hannah Nemeth on 17 October 2018.
Last updated on 30 April 2019

House fire

The actual cost of rebuilding a house only accounts for three-fifths (59%) of its market value, with the remainder based on factors such as its location, according to Direct Line.

While the cost of rebuilding the average property in the UK stands at around £114,000, according to data from the Royal Institution of Chartered Surveyors, this only accounts for 59% of its value, with the remaining 41% derived from factors such as good  local amenities, transport links and schools.

Analysing house prices for three-bedroom houses listed in September across 12 UK cities on property portal Zoopla, the insurer found that the cost of rebuilding an average-priced house worth £277,608 is 59% higher that the expected rebuild cost, which was valued at £164,000.

The gap between rebuild and market value is particularly marked in London, where the average three-bedroom house can cost £647,000, which is more than three times the average rebuild cost of £205,000 – a difference of £442,571.

After London, Brighton was the city with the second biggest ‘location’ premium, with an estimated rebuild cost of £188,000 against an average market value of £448,506. This was followed by Bristol (£305,574 vs £168,000) and Edinburgh (£275,976 vs £170,000).

Nick Brabham, head of Direct Line’s SELECT Premier Insurance, comments: “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.”

Region City Average cost of a three-bed house Estimated rebuild cost of a three-bed house Premium
London London £647,571 £205,000 216%
South East Brighton £448,506 £188,000 139%
South West Bristol £305,574 £168,000 82%
Scotland Edinburgh £275,976 £170,000 62%
East of England Norwich £247,893 £155,000 60%
Wales Cardiff £242,720 £162,000 50%
East Midlands Leicester £220,708 £164,000 35%
West Midlands Birmingham £219,585 £164,000 34%
Yorkshire and The Humber Leeds £208,986 £157,000 33%
Northern Ireland Belfast £147,797 £112,000 32%
North West Manchester £205,247 £164,000 25%
North East Newcastle £160,732 £158,000 2%
United Kingdom   £277,608 £164,917 69%

Source: Direct Line SELECT Premier Insurance, 2018

The research also revealed Brits’ lack of accuracy when it comes to working out the rebuild costs of a property. Researchers asked 2,000 Brits how much it would cost to rebuild a three-bedroom house worth £226,750.

Those polled suggested that it would cost, on average, 38% more than the actual cost of rebuilding. This means that homeowners may be giving inaccurate figures when buying buildings insurance and could be paying over the odds for their insurance premiums.

However, Mr Brabham warns that under-insuring your property can be even more devastating should you need to make a claim.

“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 under-insurance is only realised when it’s too late, but this is preventable,” he adds.

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Interesting figures. I'm

Interesting figures. I'm surprised the rebuild cost is such a high percentage. The estate agent who sold me my
house described it as a £70000 house on a £160000 plot.
I suppose the percentage depends if the house has already been knocked down and rebuilt as keeps happening around here.
As for the remaining 41% it has little to do with the factors listed and everything do with getting planning permission.
Years ago I read that the house builder Crest spent more money on trying to get planning permission for land than it did on bricks.