The side and rear extension on this Victorian stone cottage is clad in white render, creating a contrast between the original building and the contemporary extension. Read more about this extension…

A two-storey extension could be the perfect way to transform your home, increasing living space and bedroom accommodation simultaneously. It may also prove more cost-effective than building a single-storey extension, as it spreads the cost of two of the most expensive elements – the foundations and the roof – bringing down the average construction cost per metre squared. Using the roof space too could be even more cost-effective.

Building over more than one storey is also more space-efficient as it sacrifices less of an outdoor space than a singlestorey extension of the same area.

Assessing potential

The rear of a property usually offers the best opportunity to add a two-storey extension, especially on a terraced house or semi-detached property.

Where a property has a large outdoor area, as many houses on a street corner do, there may be the potential to extend over two storeys at the side. In some instances, a two-storey extension can be at the side and project to the rear or to the front of the existing property.

Where there are height restrictions on the roof, imposed by the planners (Find out more about planning permission), there may still be scope to add a second storey by using the roof space to form a one-and-a-half-storey extension. Alternatively, it may be possible to dig down into the ground and build two storeys while still keeping the height of the extension roof low — this could result in a basement level or split-level design, and can work especially well on a sloping site.

It is also worth considering whether an extension at first floor level could be more than two storeys high — for example, at the rear of a Georgian terraced property with several storeys.

Using the space

Generally, ground floor space will be used as living accommodation, and first floor space for bedrooms and bathrooms. However, where there are great views from the house, or if it is built into a slope, it can be worth considering having a living room upstairs.

Equally, ground floor space could be used for bedrooms — it is ideal for a self-contained annexe and easily accessible. This could be used for guests, independent accommodation or as a home office.

Adding value

Properties are generally valued on the basis of price per m². To get an idea of the property values in your area, find several properties that are comparable to what you propose to build, and divide the asking or sale price by the area of the property. This will give you an average value per m². If you compare this with the average cost per m² of building your extension, you can work out whether or not your proposals are financially viable.

Be aware that there is a limit to how much value you can add to your home, known as the ceiling value. In essence, it is usually difficult to exceed the highest price ever paid for a property in your area, unless the design you create is quite exceptional.

There are several variables that affect the cost of building an extension. Material costs are broadly the same across the whole of the UK, but your choice of materials, fixtures and fittings will have a very big influence on the final cost — especially your choice of kitchen and bathroom fittings and flooring.

Typical build costs

Unlike material prices, labour costs vary significantly across the UK, from £70-£120 per day for a carpenter or bricklayer in many rural areas up to £200-£300 per day in central London. If you have time and good DIY skills, you could use some of your own labour to substitute that of subcontractors and reduce costs that way. There are big savings to be made through DIY, but it can prove a false economy if you take on too much work yourself.

The cost of project management is another big factor. A building contractor will typically charge 15-20 per cent on top of the net cost of labour, materials and overheads. If you get competitive tenders for the contract, you may be able to squeeze this margin. When there is little work around, this margin can be significantly reduced, as builders may take work on just to keep trading.

If you have the time and confidence, you could manage the project yourself instead of using a contractor, and save some of the 15-20 per cent margin.

An important factor to consider is value added tax (VAT), which will normally be charged at 20 per cent on all labour, materials and services. If you employ a project manager to run the build, and individual subcontractors directly, and they each turn over below the threshold for VAT registration, then you will not be charged any VAT on labour. This can result in a big cost savings.

There are some instances in which renovation work is charged at the reduced rate — for example, if the property has been empty for two years, or if there is a change in the number of dwelling units.

The complexity of the design is also a significant factor in determining build costs — generally the simpler the design, the less expensive it will be to build.

As a starting point for budgeting purposes, base your costs on a figure of around £1,250 per m², plus VAT if you are planning on using a builder.

Move or improve?

Added value is not the only consideration when deciding whether to proceed with an extension. To make a fair comparison with moving home, you need to take moving costs into account too. In some circumstances, adding an extension will cost more than the value it will add to the property in the short-term, but can still work out as much less expensive than moving to an equivalent larger property once estate agent fees, legal fees, Stamp Duty and removals fees are factored in.