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Market value of homes typically 59% higher than rebuild cost, claims insurer

An insurer claims there is a huge gulf between the cost of rebuilding a house and its market value because around two fifths of the market value of a home is attributed to location and demand rather than the property itself. 

Direct Line has analysed property prices for three bedroom homes across 12 major UK cities and claims the average house open market value of £277,608 is 59 per cent higher than the projected rebuild cost of a similar property, put at £164,000.

Predictably, the company says this gap extends further in London where bnuyers typically spend an average of over £647,000 for a three bedroom property, more than three times the average rebuild cost of £205,000. 


After London, Brighton has the second highest location premium, with residents paying more than double the estimated rebuild cost to purchase a property. This is followed by Bristol, Edinburgh and Norwich, all of which have location premiums of 60 per cent or higher.

The research also suggests - again, perhaps unsurprisingly - that the public have little to no idea of the amount it would cost of rebuild their property.

On average adults consulted in the study estimated it would cost an average of £226,750 to rebuild a three bedroom house, which is in fact 38 per cent more than the actual cost.

The company claims that as a result homeowners could be using an inaccurate figure when buying home insurance and therefore increasing the cost of their building insurance unnecessarily. 

“Wherever you live in the country and whatever the property premium on your home, it is vital that you value the rebuild cost of your property accurately. This will help ensure you are suitably covered especially if your property has bespoke features, if it’s listed or made of non-standard construction materials” says Nick Brabham, head of Direct Line’s Select Premier Insurance brand.


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