The average price of a three-bedroom home in the UK would be just £164,000 rather than the current £277,600 if properties were bought and sold based purely on their rebuild value, research has revealed.
Direct Line Select Premier Insurance says that factors such as location, the quality of local amenities, transport links and schools drive up the average price of a house in the UK by 59% or £114,000.
The insurer’s research also reveals that Brighton and Bristol have the largest ‘location premiums’ outside of London followed by Edinburgh and Norwich, all of over 60%.
Some cities feature homes that sell for almost exactly their rebuild cost including Newcastle, where three bedroom houses are just £2,700 more to build than to buy.
By contrast, the gap between rebuild value and sale price is highest in the capital, where it costs £205,000 on average to reconstruct properties which are worth £647,000, a premium of 68% or £442,570.
The research has a serious point over and above shock value. Direct Line says home owners have little or no idea of how much their homes would cost to reconstruct and on average over-estimate it by 38%. This pushes up their insurance premiums unnecessarily, it is claimed.
“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 [can] add to the price of a property,” says Nick Brabham, Direct Line’s head of Select Premium Insurance (left).
His company used Zoopla figures to compile its report and looked at 12 cities across the UK.