What Might Be The Quickest Method Of Creating The Most Significant Value In UK Property?

Real Estate around most parts of the world is usually measured in square meters, and in some quarters, in square feet. In the UK, our preference is to use the more traditional square feet metric, and there are often squabbles between developers, constructors and sales agents between SQFT and SQMT metrics. The smart person is able transition between the two seamlessly using the simple rules of x10 or ÷ 10, and the more specific of 10.764 multiple to convert.

There is another value metric, and although it plays a significant role in the value of UK property, surprisingly, it often goes unnoticed. What is it? ... BEDROOMS!

According to the Royal Institution of Chartered Surveyors (RICS), a fair indication of a bedroom is a space which can fit a small single bed and has a window. There's no legal definition for a bedroom in the UK. However, it's used to describe a room where someone sleeps and you'd find furniture such as a bed. Building Control and Planning Authorities also have their say on minimum, maximum, single and double standards, which I will write about another time.

The average value of an additional room in the UK is £42,000, and in London, a whopping £76,476 per room. Research from property platform, Boomin, has revealed that the value of the nation’s spare rooms is estimated at at least £791.5bn, and that’s just those of us that admit to having two or more.

When perspective JV partners sound me out with a deal that is often unviable or tight for profit margin, the first value-add avenue I investigate with my legal, technical and commercial teams is the possibility of legitimately adding more bedrooms to the scheme. Of course there is science, engineering and art involved in creating that value - but in simple terms, it is the quickest method of creating significant value in deals.

For example, the main title picture is a floor plan picture of one of my earlier projects in Bow, London. We converted a ex-local authority property from a two-bedroom maisonette into a three-bedroom maisonette. Combined with a programme of renovation and good market conditions, the effect was an increase in real market value of over £100,000.

With a combination of multiple present market crisis points; in the lack of a supply of stock, rise in interest rates and inflation, the affordability of buying UK property for the ordinary buyer has reduced. There is a genuine need of the supply of rooms, and with a good number of UK rooms already available, together with further potential to add more for those who know. Statistics from the English Housing Survey by the Office for National Statistics show that 38% of homes in England are under-occupied - meaning they have two or more spare rooms. With 24.7m homes across England, that’s 9.4m homes boasting two or more rooms that are largely surplus to requirement.

According to Spare Rooms, the average rent in London (Q4 2022) is £935 pcm - up 22% year on year from an average of £768 in 2021.

Bringing It All Together

Every crisis presents an opportunity. In the UK, we value property by number of rooms more so than any other metric. There are rooms available, and with the correct IP and knowhow, there are opportunities to create more rooms. More rooms means more value and cash flow. Therefore my conclusion is that the quickest method of creating significant value in UK property is by adding bedrooms.

ABOUT THE AUTHOR:

Babrul Matin is on a journey to becoming the ‘Islamic Investor’, he is best known for Real Estate Development in the UK market. Babrul's mission is to combine ethical performance with profitability, and drive shariah-compliant investment and business practices in real markets across the Globe. For the past 19 years, Babrul has been a specialist teacher, trainer, coach, consultant and public speaker in business, economics and Islamic property development. He is the host and founder of the UK Islamic Property Investors Network.

Babrul has written for, or been covered by, Property Investor Today, The British Council, The Red Money Group, The Office for Standards in Education, The Specialist Schools and Academies Trust, Islamic Finance News, as well as various local news outlets.