Bricks and mortar account for only 59% of a property’s market value, according to Direct Line Select Premier Insurance.

The insurer found that there is a massive difference between the cost of building a house and its market value. Two fifths (41%) of a property’s value (approx. £114,000) are derived from factors such as the quality of local amenities, transport links and schools, as well as demand for homes in the area.

The average house price of a three-bedroom home across 12 major UK cities is £277,608 – 59% higher than the projected £164,000 rebuild cost.

Location counts

The location of a property carries most weight in London where homeowners typically spend an average of over £647,000 for a three-bedroom home, more than three times the average rebuild cost of £205,000. The property premium (£442,571) is so large, it’s actually greater than the average UK property price.

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

What’s your rebuild cost?

Many people have little idea of the amount it would cost of rebuild their property, with British adults estimating it would cost an average of £226,750 to rebuild a three-bedroom house, 38% more than the actual cost. As a result homeowners could be using an inaccurate figure when buying home insurance and increasing the cost of cover unnecessarily.

Nick Brabham, head of Select Premier Insurance, said: “Although people may be surprised by the amount of value placed on a property’s qualities beyond bricks and mortar, this analysis shows just how much intangible benefits such as local amenities, location and transport links add to the price of a property.

“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. For many, the impact of under-insurance is only realised when it’s too late, but this is preventable.”