Move up, not on, if you need extra space

Rocketing house prices and higher rates of stamp duty have made moving home a very expensive business indeed. Increasing numbers of people are choosing to extend their current homes rather than move house in an attempt to reduce costs. But does it work?

Next month my daughter Imogen starts school, and we are being joined by an au pair who will collect her from school and look after her until I get home from work. The new addition to the family presented me with a stark choice - move house or move up into the attic.

Since I moved into my 'compact' terraced house in south London seven years ago, its value has risen by 166 per cent. This sounds great until you realise that I would have to spend even more to buy a bigger home in the same area, or the same amount for a bigger home further from the centre of London.

The sensible thing would be to move closer to Imogen's school in Streatham, where properties are cheaper. But we have fantastic neighbours, lots of friends in the area, we're close to Clapham and Wandsworth commons and the Tube, and I feel safe - all good reasons to stay put.

A quick scout around our area indicated I would have to spend at least £450,000 for a property with three decent sized bedrooms (we currently have two decent rooms and a cupboard I use as a study). To move for the sake of an extra room would cost £12,000 in stamp duty on the new property, about £1,000 in conveyancing fees for the sale and purchase, and about £8,000 in estate agency fees. When you throw in the costs of a removal firm, mortgage arrangement fees plus the difference in value between my home and the new one, I would have to find an extra £86,800 to upgrade.

The alternative was to convert my attic. I invited three specialist loft conversion firms to provide quotes, and went for the most expensive - £36,000 including VAT - on the grounds that the firm, Loft Rooms, provided a complete service. I wouldn't have to worry about finding an architect, surveyor or getting planning permission - the firm would handle it all. It had also converted a friend's attic and came with a strong recommendation.

Demand for loft conversions is strong in London, and I had to wait five months until Loft Rooms could begin the work. But this gave me time to remortgage to raise the money. I incurred a £60 valuation fee, but there were no application fees and the lender, Abbey National, covered the cost of conveyancing because I used its choice of solicitor.

I also had to talk to the neighbours about the work, what it would involve and whether they wanted a party wall award (see below). One set of neighbours were happy for the work to go ahead provided they could see a copy of Loft Rooms' indemnity insurance policy. The other side were more nervous - understandably as the party wall on this side had suffered subsidence about 20 years ago - and they requested a party wall award. This cost me another £1,000, even though I retained the same surveyor to keep fees down.

Finally at the beginning of July the work began. I came home one evening to find the front and back of my house enfolded in scaffolding and two large holes in my roof.

The team who worked on the conversion were very careful about containing mess - they put dust sheets over the carpets and vacuumed diligently before leaving every day. But having your attic converted is a bit like having a baby - no matter how much people warn you, you can't imagine what it will be like until it's happening. By the time they had broken through the first floor ceiling to put a new flight of stairs in, and the plasterers arrived, I had given up on any form of housework. There was just no point.

Then there was the plumbing. I spent a glorious afternoon blowing £2,000 on a bathroom suite and shower. Unfortunately I hadn't bargained for the new hot water tank, boiler and pump needed to get the hot water up to the attic. Bye bye £1,800. The hall was much darker now, as a skylight had been removed to make room for the new bathroom, so I had a Perspex pyramid fitted into the ridge of the roof. This cost another £300.

Now the builders have gone, I've been left with one huge room with french windows overlooking the garden, and a second bathroom. Neither are decorated or have proper flooring down - that will have to wait until my finances recover, but I expect that will cost another £2,000. This will bring the total cost of the new room to £43,160.

But now comes the really good bit. At the start of the conversion, an estate agent valued the house at £385,000. He now estimates the house is worth £465,000 - an £80,000 increase. So I have made £36,840 in five weeks. Better still, it's enabled us to stay where we want to be. Anyone can put up with a bit of plaster dust for that!

Beware - it's not just your party

You will avoid paying stamp duty, estate agency and
solicitor's fees by extending your home or converting
your attic. But if you live in a terraced property or one
that is close to your neighbour's, you can still end up
paying bills of ?1,000 or more before a single brick is
laid.

The cause of the extra burden is the 1996 Party Wall
Etc Act. It requires any homeowner who is intending to
build an extension or conversion or dig a hole that
affects an existing wall or structure shared with another
property to notify that neighbour of the plans in writing
at least two months before work starts.

The neighbour must respond, either in favour or with
suggested amendments, within 14 days, or you will be
regarded as being in dispute. If you can't come to an
agreement, the next step is for you both to appoint a
surveyor (different from the one employed to supervise
your work) to draw up an 'award'. This is a document
that sets out when and how the work will be carried
out, records the condition of the building next door
before the work begins and allows access to the
surveyor to inspect the work in progress.

The person who is planning to carry out the work is
usually required to pick up the bill for both sides.
Surveyors in London typically charge ?500 plus VAT
when acting for one party and about ?800 plus VAT if
acting for both. This covers the cost of an initial
inspection and report, the drawing up of the award, and
inspections during and after the work is completed to
make sure any damage is put right. If you decide to
employ separate surveyors and they cannot agree,
they have to nominate a third surveyor to resolve the
dispute.

• For a free brochure - 'The Party Wall etc Act 1996:
explanatory booklet' - call 0870 1226 236