Will Building an Addition Add to Your Home Value?

by Team HomeServe
House Construction Framing Gradating Into Finished Kitchen Build

Do home additions add value? That's a question often asked by homeowners looking to increase their living space by building up or out. Your family might need the extra space now — but will it be worth as much to future buyers?

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While a home addition can make your home more practical and comfortable, it's worth finding out what you can expect to recoup if you decide to sell. The advice below can help you decide if building a home addition is worth it.

Does Adding an Addition Increase Home Value?

So, do home additions add value? The answer, undoubtedly, is yes, but the amount varies based on several factors.

How much value a home addition adds to your home depends on both its previous and new size. The type of addition you add is also important. It's also worth bearing in mind that how much value you recoup when you decide to sell depends on the area you live in. While you almost certainly won't recoup the full cost of the project, Remodeling's National Cost vs. Value Report for 2023 says adding a primary suite could offer a return on investment of around 22.7% to 30%, and an extra bathroom could net you an ROI of 30.2%.

It's also worth considering whether this home improvement project will involve making significant changes to your plumbing or electrical systems. This can lead to some major construction that’ll also jack up the price of the project. As a general rule, the greater the amount you spend on building your addition, the lower the percentage of that investment you should expect to recoup in resale value.

Figuring out exactly how much value an addition will add to your property is difficult, and your builder may be able to give you a rough idea based on homes they've extended previously. Alternatively, you could try looking at the selling prices of similar homes in your area with and without additions and figuring out the price difference.

Is It Worth It to Add an Addition?

House value aside, there are plenty of good reasons to build an addition. Additions can make your home layout more practical and provide much-needed space for a growing family. If you are finding your existing layout cramped and uncomfortable, adding an addition can make your home more enjoyable to live in.

Another benefit of building an addition is that it allows you to avoid the hassle of moving house. While building an addition is a significant investment, it may well be cheaper than selling your house and upgrading to a larger home. If you’re trying to decide whether to extend or move, compare the amount you would have to spend on a larger house — including moving expenses and legal fees — to the cost of building an addition. If you find that building an addition ends up significantly cheaper and you're generally happy with your home's location, you may be better off staying put.

Finally, consider how much of a disruption you're prepared to tolerate. Your builder should be able to give you an idea of how long the project will take, how much the build will impact your day-to-day life and whether you can continue to live in the house while the project is ongoing. Renting a temporary space can be expensive, so it's important to factor this into your calculations. If living on a building site or moving elsewhere for a while doesn't appeal to you, building an addition may not be worth it.

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Is It Cheaper to Build a Second Story or an Addition?

Adding a second story to your home is significantly more expensive than adding an addition because you'll need to remove your existing roof, build a floor and walls and install a new roof. According to HomeGuide, building a second story costs between $100 and $300 (CAD 136 and CAD 410) per square foot, adding up to between $100,000 and $350,000 (CAD 136,000 and CAD 477,000) for a typical family home.

How much it costs to add an addition depends on how much space you want to add and the type of addition you choose. Bump-out additions are a relatively affordable way to add extra space to an existing room, generally costing between $5,000 and $30,000 (CAD 6,800 and CAD 41,000). Adding an extra room with a cantilever or modular addition will set you back between $10,000 and $30,000 (CAD 13,600 and CAD 41,000).

However, that's not all you need to consider when choosing between a second story or an addition to boost your home. Generally, you'll be able to stay in your home while you're building an addition. If you're adding a second story, you'll need to rent temporary accommodation for the project's duration, adding a significant expense.

Finally, consider the potential ROI. Adding a second story generally offers a slightly higher ROI at 83% on average, according to This Old House. A second story could also make your home a more attractive prospect to potential buyers.

All CAD conversions are based on the exchange rate on the date of publication.