Adding an extension or a loft conversion to your home could increase its value by almost a quarter, new research by Nationwide Building Society reveals. For cash-strapped and space-starved homeowners it might actually be more cost-effective than moving, as the company’s research found that creating extra space can cost a lot less than trading up to a bigger property.

The research shows that nearly one in five further advances made by to its mortgage customers this summer was to fund structural work such as extensions.

Nationwide’s House Price Index Special Report looked at the additional value of improvements made to an average three-bedroom house and it found that:

Creating an extra bathroom adds 6% to the value of the average home
Adding another double bedroom pushes up the value by 12%2
Building an extension or loft-conversion to create a double bedroom and en-suite bathroom adds 23%3 to the value of the average UK three-bedroom property
Increasing floor space by 10% could add 5% to the average value

And whilst upsizing from a three bedroom house to a four bedroom, two bathroom property would cost an extra £40,0001 on average – not including legal fees and moving costs – the price for building an extension can cost around £30,000 or £35,000 for a loft conversion.

For people living in more expensive parts of the UK, such as London where moving from a three bedroom to a four bedroom property carries a £90,000 premium on average, extending may well be the only solution for the growing family.

Robert Gardner, Nationwides Chief Economist, said: “With housing market demand still very weak, increasing numbers of homeowners may opt to improve rather than move. Our research assesses the factors that affect the value of homes, and the potential to add value.

“Having more useable space is generally thought to be consistent with better quality accommodation and people are prepared to pay for it. A 10% increase in floor space, other things equal, adds 5% to the price of a typical house, whilst adding space equivalent to the size of a double bedroom to a two bedroom house can add around 12% to its value.”