Renovate your home to build a real space saver

House prices are rising again - and it's posing a dilemma for homeowners in need of extra space: can they afford to move somewhere bigger or should they add extra rooms to their existing property?

The average UK house is expected to increase in value by 6 per cent over the coming year, according to website Propertyforecasts.co.uk. And even though this predicted increase is far less than the 30 per cent hikes witnessed at the height of the property boom a few years ago, it still means that moving house is likely to become even more expensive over the coming months.

A study published by the Woolwich this week revealed the cost of moving from an average £174,744 semi to a detached home worth £293,248 is £12,535 - up from £4,535 six years ago.

Andy Gray, head of mortgages for the Woolwich, says this huge rise can largely be attributed to house price inflation pushing an increasing number of detached properties through the Government's 3 per cent stamp duty threshold of £250,000 - trebling tax bills in the process.

"At the top end of the market, people are getting unsettled by headline numbers like £25,000 to move up from a semi to a detached," he says. "At these levels people are thinking seriously about extending or converting a basement or loft which can be more cost-effective than moving."

A spokeswoman for the Royal Institution of Chartered Surveyors agrees that many people are looking to carry out major home improvements rather than go through the stressful and expensive process of finding a new place to live.

"People are extending outwards, upwards and downwards to improve the property they own," she says. "This also means they can avoid having to move and pay expensive stamp duty and agents' fees."

Start with a dose of realism. You need to decide exactly what you want from the project. Are you planning to start a family and need an extra bedroom? Do you want an office to allow you to work from home? Have you always fancied having a mini-gym?

If you are looking to expand purely to increase the value of your property, you need to be careful to ensure your plans are cost-effective. As the cost of enlarging your home depends on a number of factors - such as location, the size of the project and the materials used - the estimates we quote are just for guidance.

As well as the actual building costs - illustrated in more detail below - you will also have to pay for planning and legal fees, as well as the costs of employing architects and disposing of waste in a skip. When you are getting quotes from builders, it's worth adding an extra 15 per cent to cover any unforeseen problems.

To decide whether it's worth building the extra room - or moving - you will need to compare the money required to buy the larger house and the moving expenses, with the construction and planning costs.

You also need to decide how to pay for the work. Unless you have enough savings in the bank this will require borrowing cash. Richard Mason, director of Moneysupermarket.com, says it depends on how quickly you intend paying the money back. "If you only need the money for a year you can go for a credit card that has a 12-month interest free period for balance transfers or purchases," he suggests.

Also worth considering are unsecured loans, which can be arranged for around 5.6 per cent at the moment, or even re-mortgaging your house - with your current lender or even with a cheaper deal elsewhere - and adding the extra money required to the total.

The sheer number of houses with conservatories proves they are still one of the most popular - and affordable - ways of providing an extra room. The majority of conservatories won't need planning permission, and can cost from as little as £3,000. Estate agents estimate they can add between 5 and 10 per cent to the selling price.

Loft extensions or conversions are another popular option and one that estate agents estimate will add between £15,000 and £20,000 to the value of a £150,000 home. The benefits are that you are making use of an area that's often overlooked in a house. On the downside, it means that you are removing storage space.

If you have room to put in a garage costing around £15,000, this could boost the value by £40,000 as off-road parking is increasingly wanted by homeowners. If, however, you can park on a driveway, then it might be worth converting the garage into another room.

Phil Bateman, managing director of the Garage Conversion Company, says people have asked him to produce everything from extra bedrooms to offices - and even a bookmaker. "We have already converted over 1,000 garages," he says. "I'm convinced it will become a more popular way of creating extra space in your house than a conservatory or an extension."

Costs will vary enormously, but you will probably pay upwards of £25,000 for a basic single-storey extension, although two-storey versions won't be much extra as the foundations will already be in place.

According to Graham Merton, managing director of London builders Eaton Gate, creating basements is one of the current boom areas. "80 per cent of my work is digging out basements to enable people to use that extra space," he says. "It can give people a complete extra floor and generates less planning problems as most of the work is underground."

The costs involved will depend on what you need. If you already have an unused cellar then it will be a relatively straightforward case of making it habitable, but if you need to dig out the foundations, it will cost thousands of pounds.

Remember that every street will have its own ceiling value - regardless of the amount of work you put into it. If every other house in the road is worth, for example, £250,000, then even adding on another six bedrooms will not boost the value enough to make it worth your while.

'Our garage is now a new room'

Peter and Janet Monahan have just had their integral garage converted into a lavatory and utility room - and are delighted with the results.

The retired couple, who live in the village of Ravenstone, Leicestershire, wanted to increase the space inside their three-bedroom semi-detached house.

And they decided to go ahead after finding the website of the Garage Conversion Company, which completed the project in two weeks.

"The main reason for having the work carried out was to have a downstairs toilet, but we also thought that an adjoining utility room would be very useful as well," says Peter, 62. "We now have an archway through from the hall into a lobby that leads to both, while the front of the utility room also matches the rest of the house so it doesn't look like a converted garage. It's only just been finished so we haven't decorated it yet, but we are very pleased with it."

The cost of the conversion work and installing the bathroom suite has been approximately £18,000, which the couple believe is money well spent.

"We used to keep my wife's car in the garage but, as there is enough space for two cars on the drive, we had everything to gain and practically nothing to lose by converting it," adds Peter. "It's a very economical use of space. The workmen were also very well organised and kept to their word."