How Much Does An Extension Add Value?

Many of our home extension clients ask the same question: Does a home extension make financial sense? It’s a good question to ask. A home is one of the biggest purchases many of us will make, so we need to think carefully about the money we invest into it.

However, there are two ways to look at what’ worth it’ means. The first is in simple financial terms – the cost of the extension. The second is in emotional terms – the value of the extension.

In most cases, an extension will add value to your property. Additional living space is always appealing to a potential buyer, whether it be more living space, a kid’s playroom, a larger open plan kitchen with dining room, or a utility room and ground floor WC. From experience, most people are enjoying a larger kitchen/dining room where families can spend time together, and you will often hear that these rooms become the rooms where families spend most of their time together, this also adds entertaining space for guests. Check out our range of dual occupancy builder for your dream house.

A Home Extension In Simple Financial Terms

In terms of seeing a financial return, a home extension is something you should be thinking of as a medium- to long-term investment – say five or more years.

As house prices rise over time, if you plan to stay in your home longer term, it is likely that your home extension will become, in terms of financial profit, worth it. You will also have had years of enjoying your home extension.

If you’re not planning to stay where you are for the long term, we suggest a better way to realise value is to gain planning permission for the extension but not build it. The value that planning permission will add to a property is typically far more than the cost of securing it, making it a ‘quick win’ in comparison to building the extension.

Extensions That Will Increase Your Property Value

Conservatory Extensions

Australia is an outdoor-loving nation, and what better way to add a bit more sunshine to your home than through a conservatory? Whether you’re in the Cairns rainforest or on the balmy cliffs of Bondi, adding a conservatory will allow you to experience the serenity of the outdoors from the comfort of your very own home.

Best of all, conservatories can be exempt from development approval. This means less paperwork for you while still adding that all-important value to your home.

Loft Conversion

Lofts are often spaces that are overlooked when it comes to re-vamping. If you are in need of an extra bedroom, a second living room, or even a games room, a loft conversion is the house extension for you.

This internal conversion is much more simple than adding exterior building work to your property and will not require development approval. This seemingly simple home upgrade can increase your home’s value by 22%. How’s that for an investment? All that’s left to do is to clean out that loft.

Add A Second Floor

This is the creme-de-la-creme of house extensions and will add a staggering amount of value to your home. However, this highly complicated extension can cause inconvenience, as your home will be without a roof for some time.

In the long run, the addition of a floor is a fantastic investment and will add a huge amount of value to your home without sacrificing its outdoor area. If you dwell in a picturesque area, the view from your double-floored home will increase your property value alone.

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Extend Outwards

Whether you want to add one room or a few, extending outwards is a fantastic way of utilising your property’s land space. Extending outwards also tends to be less expensive than extending upwards.

When planning to add a ground-level extension, it’s important to consider the slope of your land.

Alfresco Verandah Extensions

Extending outward can also mean an entertaining outdoor area. An alfresco verandah provides a comfortable entertaining area for your home. A ceiling fan, lighting and outdoor kitchen add appeal.

Quick tip: The difference between a pergola and verandah is roofing – a pergola has an open roof.

Granny Flat

If you’re after a side source of income, adding a granny flat to your home is a great idea. This separate dwelling can easily be rented out on a weekly, monthly or yearly basis.

Plus, it is a fabulous way to add value to your home. All you need to have is a large land area adjacent to your home and some money to invest.

Is Building An Extension Worthwhile?

Sure, everyone likes a little extra living space, and extensions increase the square footage of a property which usually adds value. But, before you rush in, take your time to consider the following factors so you can be sure an extension is right for you:

Ceiling Price In The Area

All areas have a ‘ceiling price’. That’s the maximum amount people will pay for a house in a specific area, regardless of what work has been done to it.

People will often look to buy the worst house on the best street. Few people want the best house on the worst street.

Therefore, before starting work on extending the property, check that the house isn’t already approaching its ceiling price. A good estate agent will be able to advise on this.

Build Costs Vs Value Gain

In most cases, adding an extension will increase the value of a property. However, that isn’t the only consideration you should make.

If you are planning on selling your property in the near future, the cost of creating an extension must be less than the value you’ll gain from doing so. Planning for a new look for your house? Look no further!  Home Builders  is here to help in your dual occupancy builder Melbourne.

You can get quotes from local tradesman for the cost of the build and then compare them to the estimated value increase you’ll get.

Complexity Of The Build

The complexity of building your extension will also come in to play when asking if building an extension will add value to your property.

If you are looking to build on sloping ground, for instance, the extra work that will be required to lay the foundations could make the extension more expensive than the amount you’ll gain in added value.

Quality Of The Build

If you’re looking to build to add value to your property, make sure that qualified people do the work to a high standard.

For instance, if the extension will require electrical work, use a Part P qualified electrician who will ensure the work meets current building regulations.

A poorly built extension that doesn’t comply with building regulations can actually lower the value of the property rather than increase it, as potential buyers will need to factor in the costs of rectifying the issues.

Inconvenience & Stress

Of course, as with any major property renovation, there will be an element of upheaval for anyone living at the property.

You’ll want to be sure that the amount you’ll gain in property value increases, justifies the inconvenience and stress you’ll experience while the works are ongoing.

Finance Costs

If you don’t have the money to pay for the extension costs up-front, be careful that the cost of gaining the finance needed will not outweigh the value you’ll add to your house.

More Is Better

The obvious reason why an extension would add value to your home is that more is better. A house with 5 rooms will be of higher value than a house with three rooms, making the benefit abundantly clear in this case. Whether you plan to sell or rent the property, a house with extra bedrooms, living areas, or even a man cave is always going to appeal to those looking to buy or rent. Hence, offering the perfect opportunity for homeowners to increase the monetary value of their home by maximising the property’s market value. While you get to enjoy living in a more spacious house, you also reap the rewards of the investment that you make when and if you ever plan to sell or rent it out.

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Another benefit of a home extension is that you can modernise your home. Clients may opt for a home extension followed by an in-house renovation. As a result, they’re able to give the inside of their home a brand-new look with an increased living area. It’s like moving into a new house but never moving out of the old one, allowing you to live in the same home where you created life-long memories with friends and loved ones.


The average cost of an add-on to your property (e.g. second storey extension) is usually between $170K to $270K. This statistic shows that it is more cost-effective to expand your current home rather than sell it and buy another. Think about all the expenses when you sell your house for another, for example, real estate commissions, inspections and many other miscellaneous expenses, just to sell and buy. On top of that, once you have bought the house you would like to move into, there is also the cost of moving, not just financial but also take into account that you may have to take a few days off work to set up your new house resulting in loss of income/wages. Conversely, when you are extending, you only have to pay for the extension itself, a building permit and a few inspections. At Duncan Thompson Extensions, we make sure that our clients are aware of all costs so that there are no surprises at the end.

Design Freedom

One of the biggest, if not the biggest benefit, is that you can design the new part of your house exactly how you would like to. If you were to move into a new house, you are buying a house designed by someone else, but you would have endless design power and freedom within your owned part of the land when you extend your home. The truth is that if you want your dream home, your best way of getting it is by designing it yourself, rather than thinking that you will find it, as every other home is built to someone else’s preferences. Home Builders has the best range of dual occupancy builder services to help you create your dream house.

Now is the time

As we all know, COVID-19 has negatively impacted all of us in some way or another. However, one of the very few benefits of this pandemic is that the government is now providing a $25,000 grant for housing construction/renovations in an attempt to bolster the industry and economy. Hence, this is ideal for you to go ahead with the renovation/extension you were thinking about. If not now, when? Such an opportunity doesn’t come around often.

Paying It Forward

As well as considering potential financial gain, it’s also worth remembering that a home extension can be a good way to solve common problems.

Could it fix the problem with the ageing, leaking conservatory? Will it give you a bigger kitchen that it will be easier to live life in? Will it improve the flow of your home? Will it mean you can open the back door and go straight into the garden? Will it give you space for an office? Does it provide a room so people can come and stay?

Often we work with people who will be looking to stay in their home for the foreseeable future. We often hear the term ‘forever home’. By undertaking the project, they are hoping to create a home that really works for them, not to mention reduces future maintenance issues.

In effect, by completing the work, our clients are looking to release long term value for themselves. They are effectively buying low (by buying at today’s prices) to enjoy the future without worrying.

Because Some Things Are More Important

There are also emotional considerations.

A bigger kitchen diner would let you entertain friends and spend more time together as a family. Swapping the positioning of the sitting room would let you enjoy the sunset sipping a glass of wine. Additional bedrooms would let you host family at Christmas. A more welcoming entrance would make you smile when you came home every day.

These experiences give almost priceless enjoyment, and when your home extension is designed around these precise needs, they come as part of the package.

In other words, if your home extension creates your dream home and one you delight in living in, there will likely be a ‘value gain’ far greater than the financial cost. People spend a few thousand pounds each year living in a beautiful villa for two weeks when they go on holiday. For a similar sum each year in mortgage repayments, you could have a home you live in and enjoy all year round. You’re releasing long term value, day by day, year by year. And all the time, the value of your asset is rising because it’s being filled with more and more happy experiences and precious memories.

What’s More Important: Cost Or Value?

You can – and should – look at a home extension in terms of the financial cost. You need to be sure that the investment you make in your home extension is one you can afford to make financially and won’t leave you in negative equity. But you should also look at a home extension in terms of the value it will give you.

If a home extension gives you the right amount of space in the right location and allows you to live your life as you choose, then we think it’s definitely ‘worth it. Though the financial investment can be significant, the return on the investment is often greater still.

How to add the most value to your property with an extension

The key considerations when ensuring that your extension adds the most value are:

  • Using skilled tradespeople – a well-built extension made from quality materials will stand the test of time and be ultimately more valuable.
  • Think about the design and how your extension integrates with your home – a nice flow between rooms and an abundance of natural light are the ideal.
  • Consult an architect to create the optimal design and use of space.
  • Consider what is most valuable in your area. In dense urban cities, parking is difficult to find and expensive to purchase permits for – in these areas, a garage extension is a lucrative asset. In period properties with small rear kitchens, extending this space to create a generous family kitchen will make your home stand apart from the competition when you come to sell.

Home Extension Costs

The saying “failing to plan is planning to fail” certainly applies to home extensions. Especially when it comes to meeting your budget. Adding value is one thing, but if your home extension costs blow out, so does the return on investment. Building costs can vary considerably depending on a variety of factors, from material costs to planning permit delays. Ensure you do your homework and ensure the full scope of work is included in quotes from builders.

Materials are one of the biggest factors in home extension costs. Therefore, it pays to plan in detail to ensure your budget can meet the level of finish you are expecting.

Finally, a quick word on costs and value. The value a home extension adds to your home will depend on the type of extension and costs. But that’s not all. The best extensions serve a purpose (i.e. a third bedroom in a neighbourhood of 2 bedroom homes) and blend in perfectly with your home’s style, lifting the whole property’s appearance.

On the whole building, an extension will add value to your property. How much value will always depend on the key points. People will often get caught up in their thoughts when trying to achieve more value to their property and look for the cheapest builder in order to achieve the highest profit. This will not always work. As mentioned above, completing the extension to a good standard is key as most people when buying their home will expect this, especially if the extension is newly built. 

A newly built extension that is not built to a good standard will concern a potential buyer as they will be concerned as to what could happen once the property starts to settle. Sometimes the cheapest builders are cheap for a reason which can often mean poor workmanship, resulting in paying another builder to remedy the works. Look for a builder who can offer completed projects for you to view and speak to their customers for references.

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