You have an idea of your overall project budget based on available funds. And you’ve got a Wishlist or brief of sorts for your dream home extension and refurbishment project. But how do you know how far that budget will stretch and whether it’ll cover all the items on your list? This is the natural starting point of almost every project and the state of questioning we often find our clients in during our first conversations.
In this article we tackle the question of construction costs and share our experience on pre-construction costs as well as build costs for residential extension and refurbishment projects.
Contents:
How do you budget for a house extension/ renovation project?
The first step should be to separate out your Construction Budget from your Project Budget.
The latter will include all the funds available to the project. It will include the former together with professional fees, all incidentals, a contingency and any VAT applicable. The latter, as hinted by it’s name, is the budget for construction only. Equipped with this number you can begin to work out a viable scope of works; what you can actually afford to build.
Assuming that you know what your overall Project Budget is (entire funds available), the first task then should be to work out a realistic budget for professional fees and incidentals (more on architects’ fees here) and an allowance for VAT where applicable (more on VAT in construction here). Strip those figures away from the Project Budget and you’ve arrived at your Construction Budget (this should be exclusive of VAT as you’ve already allocated this).
When extending and/or refurbishing existing buildings it’s also prudent to allow a contingency of 5-10% of the Construction Budget.
Here’s an example of a rough Initial Project Budget of £350k for a two-storey rear extension and refurbishment of Ground, Raised Ground and 1st floors of a central London home we are currently working on in Islington.
Initially you don’t need to get quotes from a full design team. You wouldn’t be a million miles away if your budget for professional fees was in the range of 15%-20% of your Construction Budget.
You’re not alone, that’s natural and very much a part of the process! The task then, should be to try and apply some knowledge and benchmarks (we’ll get to that shortly) to work out what is doable with the available budget. This reality check should focus the mind on your priorities and is really the first opportunity to get creative!
So, how much does a house extension cost in the UK?
Construction costs can vary widely depending on a variety of factors so that we can only talk about ranges of costs.
In our experience the construction cost of extending and refurbishing a home in central London tends to fall in the range of £2,500 – £3,000 +VAT per sq.m.
Some areas will come in higher per sq.m (for instance, new build elements such as the extension, particularly if it contains large format glazing and a new kitchen) vs other areas that may only involve light touch redecoration. However, more often than not, the cost per sq.m, tends to blend somewhere within the above range. This allows for a good specification of finishes, fixtures and fittings.
How do we calculate the cost of an extension in the UK? (And what stages of the project are these costs most accurate?)
It’s very rare we are approached to design a project with an unlimited budget (we’re still waiting for that phone call). So, inevitably we spend a significant amount of time with our clients (and as a team) discussing costs, managing budgets and expectations.
To keep a handle on costs from the outset, our process involves a cycle of designing, communicating and costing. As a general rule, the further down the road we go, and as the design is developed in more detail, the more accurate estimates on cost become.
The following steps outline our approach to managing project budget at different stages of design development. At every step, you will have the opportunity to proceed or alter the design or scope of the project to re-align with your budget (or to consider expanding your budget to accommodate your goals):
Step 1: Initial consultation
During an initial phone call or meeting we sense check your early assumptions on budget against project aspirations and will advise you on potential construction costs. Using floor plans we make a rough calculation comparing areas of new build/extension and internal refurbishment with an estimated cost per sq/m. that matches the complexity of the project. We refer to benchmarks of our own completed projects where comparable and a wealth of completed projects by others where data on cost is readily available.
This is a quick way to test your budget and make some early decisions on how to proceed.
Step 2: Project Discovery (Feasibility)
After an initial consultation we would undertake a Project Discovery or feasibility study. This diagnostic stage is about probing the brief and asking critical questions, the answers to which offer clarity on project scope, priorities and budget.
As part of this study, we utilise specialist pricing software to create an estimate of construction cost. This estimate is based on areas of individual rooms, floor and wall areas as well as new build elements and areas of internal renovation. Prices are based on up-to-date benchmark market costs and contractors’ rates for materials, labour and overheads.
Here is an example from a recent Project Discovery for an extension to a 6-bedroom detached house in St. Neots, Cambridgeshire. Sums are blended to include general project costs such as main contractor’s prelims and overheads.
At this point, with an overview of the project scope and potential project costs, we can draw some conclusions with you about project priorities and the best way forward.
Step 3: Concept design
Following a successful Project Discovery, we start design work proper. We begin to develop ideas that address your full wishlist and aim to push the boundaries of the project. The concept design stage is an iterative, back and forth process with you. Its a natural part of the process that, as we swing between budget constraints and ambition to develop the best outcome for the project, we reach too high. One of the challenges of the design process is finding the right balance. Compromises are a necessary part of the process. The art is in making the right compromises which means identifying priorities and red lines so that you don’t lose sight of the essential parts of the project.
During this stage we update our own cost estimate to reflect any changes in the design from the Project Discovery and share this with you.
Step 4: Commissioning a Quantity Surveyor (QS) in the role of cost consultant
After reaching an agreed concept design (and often before submitting a planning application) we would recommend an initial cost report is prepared by a Quantity Surveyor.
A QS is an independent professional responsible for managing the costs and budgets of a building project. To calculate build costs, QS’s use RICS per square metre cost rates, an independent data source of current construction costs as well as their own benchmark data and direct feedback from the supply chain.
This cost report is more detailed and accurate than previous cost estimates and itemises high-level project costs. With this information you’ll understand the overall budget needed to complete the project and can confidently proceed to planning knowing the design is affordable.
If we feel additional cost assurance is required in the later design stages (post-planning), we will recommend this concept stage cost model is updated. This updated cost report begins to account for more detail including some specific fixtures/fittings/materials as they become known.
Step 5: Developed and detailed design
With a budget set (based on a previous cost report) and concept design agreed, we can submit a planning application and proceed to the detailed design stage with confidence.
If the cost report is much higher than your budget you have three options:
- Alter the design and reduce scope of the project to suit the budget.
- Take a phased approach by designing for everything and implementing only part of it in the short term.
- Consider increasing the budget.
Step 6: Tender to contractors
Ultimately, there is no way of knowing the true construction cost of a project until a price is agreed with a contractor. In our experience, timing plays a part – a busy contractor will often price higher than one that has a gap to fill in their pipeline.
A robust tender process consisting of a detailed set of drawings and specification is vital to achieving an accurate price from contractors.
At the end of this stage, you will have 3-4 tender returns including itemised pricing documents from each contractor for comparison.
If we feel additional cost assurance is required in the later design stages (post-planning), we will recommend this concept stage cost model is updated. This updated cost report begins to account for more detail including some specific fixtures/fittings/materials as they become known.
Step 7: Value engineering
Before hitting the button to begin construction there is a final opportunity to make cost savings.
It is helpful to find a contractor who will be transparent about costs and is proactive in suggesting cost saving measures. For example, a strategy to reduce the spec (and cost) of a joinery package could be to replace solid timber with a more cost effective veneered timber alternative.
At the end of this step a final contract sum is agreed and the price of construction is fixed.
Step 8: Construction
While a final contract sum has been agreed, it is important to stick to the plan while on site to avoid variations and price fluctuations. Additionally, ensuring any provisional sums are fixed prior to signing a building contract will help mitigate unforeseen costs.
How has covid affected the cost of construction?
During 2021 we witnessed signs of price inflation in construction with a rise in material prices up by as much as 20-30% from the previous year. This has been predominantly caused by global supply and transport issues caused by Covid.
As of writing (November 2021) a wide range of suppliers that we’re speaking to are advising this is likely to continue in the months ahead.
We’re also seeing a shortage of capacity to deliver on projects as a reduction in labour supply, a knock-on effect of Britain leaving the EU as well as Covid. This is reflected in a small increase in labour costs of 0-5%.
As well as materials and labour, contractor’s margins are a variable of overall construction costs. We have seen margins slightly increase of 0-10% as contractors’ factor in additional risk of delays and complications with materials supplies/labour.
Frequently Asked Questions
How can I save money when building an extension?
- Re-using and recycling existing materials.
- Adapting off the shelf products as an alternative to designing bespoke items.
Supplying and taking responsibility for the direct purchase of some items yourself and removing them from the construction contract. This removes the additional overheads and profits that contractors attach to this responsibility. However, it puts management responsibilities on you (beware of causing delays to program).For more tips on saving money when building your extension read our article here.
What can affect the cost of a house extension?
- Specification of fixtures and finishes – Glazing, kitchens, bathrooms, underfloor heating etc.
- Site constraints and access for construction (terraced house, neighbours, red routes etc)
- Below ground conditions – The soil type will inform the type of foundations. The existing location of drainage and utilities (and specifically whether these will need to be relocated).
- Remediation or repair work required to the existing building.
- Type, size and shape of extension – Single/multi storey, basement, loft etc. There are economies of scale on larger projects which will equate to a lower cost p/sq.m.
- External Works – Consider any works that may be required external to the building e.g. Landscaping, driveway etc.
- Location – Construction costs in Greater London are generally higher than other areas of the UK.
- Economic factors – The combination of Britain’s exist from the EU and a global pandemic have had a negative influence on the costs and availability of materials and labour.
- Timing – Works during the spring/summer months are generally quicker with less days lost due to adverse weather conditions.
- Choice of Contractor – Larger contractors backed by bigger organisations will naturally come with higher overheads than smaller contractors. There are advantages and disadvantages to both.
