Affordability starts with flats: now costing 40% less than houses

It’s time to revisit flats and examine how they are currently offering buyers exceptional value for money.

New value research by Zoopla has revealed that while the value of houses across the UK has soared, the value of flats has lagged behind. To illustrate the difference numerically, the price of a flat has increased a little over 10% since 2016. Houses, however, have jumped in value by 43% in the same period. 

The gap between house and flat values stands at its widest for 30 years, with buyers paying an average of 1.7 times more for a house than a flat. Across the UK, the average flat costs £193,000 versus £327,000 for a house.

Flats, however, can be bought for remarkably less. In the North East, an average flat costs £86,000. Wales, Yorkshire & Humber, the East Midlands, the West Midlands and the North West also offer exceptional value, with the average flat costing £120,000 or less.

These costs can be juxtaposed with values in the south. An average flat in London costs £416,000, versus an average house at £809,000. The South East presents an interesting equation. While the average house costs almost half a million (£480,000), the average flat will set buyers back a more respectable £207,000.

Mind the gap

A house costs at least twice as much as a house almost everywhere in the UK but there are regional differences. In the Midlands, the North and the South East, a house cost an average of 2.3 times more than a flat. London and Scotland have the smallest regional gaps, with a house costing 1.9 times more than a flat. 

Leasehold: why flat values remain low

Most flats in the UK, apart from Scotland, are sold on a leasehold basis. This tenure, if not understood and managed correctly, can be tricky to negotiate. It’s why advertised asking prices and sold values are substantially less than the same figures for houses.

Buyers of leasehold flats need to factor into their decision making process:

• Extra conveyancing costs

• Service charges

• Ground rent

• The length of the lease

• The cost to extend the lease

• The ability to buy the freehold (or a share of)

• Any restrictions and covenants set by the freeholder

Government intervention: restoring the appeal of flats

The Government has long acknowledged the unfair relationship between flat leaseholders and freeholders. Finally, we are seeing the results of legislative changes. The Leasehold and Freehold Reform Act 2024 is already law. It’s designed to make it easier and cheaper to be a leaseholder.

Already implemented is a rule that allows a leaseholder to extend their lease from day one, rather than after two years of occupation. There’s also a simpler pathway to a ‘Right to Manage’ claim.

In the future, we should see marriage value banned, standard lease extension terms extended to 990, and legislation on service charges, transparency requirements and the regulation of managing agents. The current Government, however, doesn’t think The Leasehold and Freehold Reform Act 2024 is substantial enough.

Proposed reforms that go even further

The Government is working on The Commonhold and Leasehold Reform Bill, which it hopes will become an Act in 2027. The first draft explains how:

• ground rent would be capped and eventually scaled down to a peppercorn rent of £0 after 40 years

• new flats with leasehold tenures would be banned from being built

• leasehold flats would be quicker and cheaper to buy or sell

• it will become easier for leaseholders to adopt a commonhold tenure

With radical reforms on the horizon – ones that should level the playing field between leaseholders and freeholders - flats bought now offer extraordinary value for money and future potential. Leasehold purchases made with information, support and education are not a risk. Yes, there’s more to understand but leasehold flats are a great entry level purchase, downsize proposition or just a bargain way to own your own home. 

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