Market Value vs Rebuild Cost – What’s the difference?
Key points:
- Market value is the price your home would fetch if you sold it today, it’s driven by land value, location, demand and overall condition.
- Rebuild cost is what it would cost to demolish what’s left, clear the site and rebuild the property to the same specification.
- Rebuild cost usually sits below the market value (though it can exceed it for listed or remote properties).
- Insurers base buildings cover on the rebuild cost, not the market value, get this wrong and you risk being under‑insured.
Market value explained
The market value is the figure a buyer is willing to pay on the open market at a given point in time. Land value, local amenities, school catchments and supply‑and‑demand trends all feed into it.
Rebuild (reinstatement) cost explained
Rebuild cost includes:
- Demolition and debris removal
- Site clearance and preparation
- Materials and labour to rebuild the structure like‑for‑like
- Professional fees for architects, surveyors and building regs approval
Because it looks purely at reconstruction, it ignores land value and broader market sentiment.
Why the difference matters for insurance
Buildings insurance pays out on the rebuild cost, so that’s the figure to insure for. Over‑insuring wastes premium; under‑insuring could leave you thousands short in a claim. Use the free RICS BCIS rebuild calculator or commission a chartered surveyor if you’re unsure.
Need more detail? See How do I work out my rebuild cost?.