TIP OF THE ICEBERG BASEMENTS IN LONDON ARE AS POPULAR AS EVER

Figures are difficult to come by, but it appears that if you’re in the business of building basements in London, business is good. Knight Build is a developer based in the outskirts of London that specialises in ‘iceberg basements’ and their pre-tax profits for 2019 were double that of 2018. Not bad for what could be termed a difficult market in light of the political quagmire of the past few years.

Research from the Labour party has shown that planning applications of 12 London Boroughs more than doubled between 2010 and 2015, and a recent paper from Newcastle University examined the extent of residential basement developments in seven of the most affluent London Boroughs between 2008 and 2017. They found that 4,650 had been granted planning permission, of which the vast majority, 3,755, were ‘standard’ basements of one storey, 783 were ‘large’, consisting of two stories or one storey extending well under the garden. The basements that get the most press, the ‘iceberg basements’, only made up 112 of those granted planning permission.

Iceberg basements aren’t an official designation; however, they are generally considered to be at least three-stories, or two if they extend under the garden.

For many, adding basements isn’t about improving property values, it’s about adding a different kind of value. In a city where real estate is so costly and options for moving limited, basements are often seen as the solution to add space but remain in your geographical area. London has strict above-ground space limitations and many buildings are listed or in conservation areas, making adding stories above ground or extensions difficult to impossible.

There has been some bad press about basements in the capital in recent years, in 2016, Westminster Council introduced a £8,000 fee on new basement planning applications. This is a great way of generating cashflow from the 100+ basements built in the Borough each year, but the inconveniences to neighbours of pollution, noise and general disruption that justify this fee, are real. Flooding, subsidence and issues with the water table are genuine risks and legal battles by neighbours are not uncommon.

Other councils also introduced policies to restrict the size of basements lead by concerns about the water table and disruption and damage, especially in areas with many developments. Despite this, the study from Newcastle found that although there were less applications being made in recent years, the amount being approved were still at 2008 – 2012 levels. Those being approved are mainly standard or large basements, rather than the iceberg, so it appears that the restrictions have had some of the desired effect.

Basements in new developments are showing an uptick in popularity while basements in pre-existing dwellings have remained static, as land is developed and either new residential or multi-residence buildings are built.

“Most of the basements that we do are additions to preexisting buildings, but certainly including basements in plans for new builds are gaining in popularity.” Says Paul Lavelle, MD of Foran Construction. “Most multi-story buildings have piled foundations, so if you’re paying for that already, the cost of increasing this to create a basement space is negligible compared to what you’re going to gain.”

It is location dependant though and will depend on the property prices in the area. “If a home is built in zone 1, it will definitely have a basement.” Says Paul. As there are restrictions on the amount of natural light a residence needs to get (see page 24), the basements in multi-story buildings are often used for car parks, storage and gyms, rather than apartments. This holds true for residences as well; Paul tells us “most of the basements in homes will be swimming pools, cinemas and living rooms, even storage. People don’t want to go downstairs to go to bed, or put their children to bed downstairs, we haven’t seen subterranean bedrooms ourselves, people like natural light.”

Having said that, Rokstone Estate Agents who cater to the London super-rich, have seen demand growing for basements in which to accommodate nannies and other staff members; it appears it’s not a universal ‘no’ to fitting in bedrooms below ground.

Kildare builder Darren Size’s construction firm Size Group, which caters to the expensive tastes of some of London’s wealthiest residents, booked a €52m turnover last year. “We don’t normally work for developers, but we did carry out major works, including constructing a double basement with pool, cinema, two passenger lifts, a car lift and 13 bedroom suites, all on a single home in Belgravia, being sold for £125m (€140m).” Says Darren. “We’ve been involved in some of the largest basement extensions in the UK. One in London we worked on includes a pool, spa, beauty salon, cinema, nightclub, games room and parking for eight cars underground.

“One house we’ve worked on will soon be the subject of a Channel 4 TV documentary.” Whether they are a smart investment choice or not (see pop-out above), it appears for London at least, the basement trend isn’t slowing down.

SO, ARE BASEMENTS GOING TO ADD VALUE TO A HOME, OR ARE THEY A BURIED COST?

There’s no doubt that adding a basement can help add additional luxury to your home; one basement in London features an artificial beach; although the majority stick to pools, cinemas, dance floors and games rooms.

Beyond adding space to your home, potentially to lounge by a beach, a basement can significantly add value, up to 15% by some estimates. Factors that need to be considered are things like headroom, natural light (from light tunnels and reflective mirrors), and use. As previously mentioned, having your master bedroom in a basement is unlikely to add much money to the property. As with all home improvements, people looking to invest will need to consider the price ceiling in their area.

The legal wrangling, disincentives by councils and general disruption caused by building basements seem to have hardly made a dent in the capital’s enthusiasm for digging down. As long as restrictions on building up, and high property prices remain in effect, we think that the trend for basements will continue, perhaps even spilling over into other areas of the UK with high property prices.