How house prices are calculated – and how to increase the value of your home

For some people, knowing how much their property is worth is an obsession, whereas for others, it does not mean much – until they come to sell.

Valuing a property is far from an exact science. “The golden rule is that a house or flat is only worth what a buyer is willing to pay,” said Stephen McCarron, of the National Association of Estate Agents (NAEA).

If you’re looking to sell you’ll need to research carefully. Pitch your asking price too low and you could end up missing out, but if you over-price it you could end up struggling to shift it.

Here, Telegraph Money reveals how to find out your house price, and increase it. This guide will cover:

• How can I boost my house price?
• What factors decide a house price?
• How to reach a realistic asking price

How can I boost my house price?

If you want to boost the value of your home, a larger renovation project – or even just a few small changes – could make financial sense, helping you to achieve a higher asking price when you sell.

The key is to think carefully about the improvements to make so you don’t end up wasting cash.

James Forrester, of estate agent Barrows and Forrester, said: “The worst thing you can do is embark on a major project on a whim, without thorough research or planning. Chances are, it will leave you out of pocket.”

Add space

As a general rule, adding space is one of the biggest drivers of value.

Mr Forrester said: “A property extension increases the market price of the average home by 15pc. This could be a garage conversion or a garden office.” Other options might include renovating your loft or your cellar.

Based on the latest Land Registry figures, the average UK house price is now £287,506. For a property of this price, a garage conversion could potentially add £28,751 to the value, according to House Buyer Bureau (HBB), while a converting your shed to an office could boost it by almost £22,000.

However, not all extensions are created equal – a “naff” conservatory could knock up to £15,000 off your property price.

Consider a new kitchen or bathroom

A kitchen or bathroom update could be a great addition to your home and pay off when you come to sell. The kitchen is the most valuable room in the house, and as a result new countertops and upgraded white goods can go a long way.

With a new bathroom, if you get it right, at the right cost, it can really pay off.

On a £287,506 house, a new kitchen could add £15,813, according to HBB, while a new bathroom could boost the property value by £7,475.

Boost kerb appeal

Remember that anything that improves your home’s “kerb appeal” is a good investment, as it could influence a potential buyer’s impression of the property before they even step foot inside it. 

Improvements can be simple, such as giving the front of your house a fresh lick of paint, getting new windows installed – or thoroughly cleaned at the very least – and perhaps replacing your front door. 

You should also tidy up your front garden, if you have one. HBB estimates a landscaped garden could potentially add more than £4,000 to the value of your home.

Improve energy efficiency

A growing number of buyers are prepared to pay a premium for a property with a top-scoring Energy Performance Certificate, so it can be worth taking steps to boost your home’s energy efficiency.

Mr McCarron said: “More buyers are asking estate agents for properties with an EPC rating of a C or above, so ensuring your house or flat is energy-efficient could make it more attractive. This is especially the case now that preferential mortgage rates are starting to appear for more efficient properties.”

Based on a £287,506 house, installing double glazing could add £8,625 to the price, while getting an EV charging point could add almost £5,000.

Other improvements to think about might include better insulation, draught-proofing, remote-controlled thermostats, and upgrading to A-rated appliances.

Lower-cost improvements 

If you’re on a tight budget, simple jobs like repainting, decluttering, and giving your home a deep clean can all make buyers more inclined to part with their cash, without leaving a dent in your wallet.  

What factors decide a house price?

The main factors which affect how much a property is worth are:

• Asking price and sale price for similar properties in the local area
• Size and condition of the property
• Location

However, determining a property’s specific value varies depending on whether you’re trying to buy it or sell it. 

If someone were looking to buy your home with a mortgage, the lender would carry out a valuation to reach an estimate. The bank or building society does this to ensure the home is worth what the buyer has agreed to pay for it. 

Buyers may also arrange a survey, in which case the surveyor could also give their opinion on the value – for instance, if they identified any structural issues they may suggest the value should be reduced.

By contrast, as a seller, you will typically use an estate agent to help you gauge the value.

Charlie Wells, of buying agency Prime Purchase, said: “Valuing comes down to the experience of the agents involved, looking at comparable evidence, and taking into account what the property is worth to the individual.

“When it comes to ‘value’ I tell sellers there are normally three prices: what the vendor wants, what it’s worth, and what you have to pay to buy it. Very rarely are these three all the same.”

Think of it this way: the value of a property to a special purchaser who desperately wants it is very different from its value to the bank.

How to reach a realistic asking price

To get an idea of what your home is worth, you could look at property portals to find comparable homes. Graham Cox, of SelfEmployedMortgageHub.com, said: “The best way to value a property is to compare it to properties on the same road which have sold recently.” 

Your aim is to see what properties which are similar in style and condition have actually sold for in the area.

An online valuation can be a helpful starting point if you’re looking for a ball-park figure. The instant home valuation tool from the Homeowners Alliance is a good starting point, as you get both a high and low estimation of what your home could sell for. Results are based on a combination of up-to-date local data and Land Registry sold data.

If you ask an estate agent to value your home, they will look at comparable evidence as far as they can to reach their figure.

To get a rounded view of what your home is worth, you should look to get at least three estate agents who know the local market to value your home. Ask each one to demonstrate how they arrived at the price they suggest to you.