Property Tips by Chartered Surveyors  from the Haynes House Manual series

“Flats Aren’t Selling”

New research from Zoopla and The Guardian Newspaper has revealed that most flats listed for sale in England had not sold within 6 months.

On average just over 80% of flats in England listed for sale with estate agents took over 6 months to find buyers or failed to sell at all.  The worst areas were London and the South East.

Leasehold Issues

Almost all flats in England & Wales are Leasehold, which is a discredited form of ownership. Houses are normally Freehold which means once you’ve purchased the house you own it outright. The overall building or block that contains 2 or more flats is also normally Freehold, but not the individual flats themselves which traditionally buyers would typically own for a period of 99 years or perhaps 120 years or even 999 years.

Either way, Leasehold it is an inferior subsidiary form of ownership that usually involves paying an annual ‘ground rent’ and ‘service charge’ to the Freehold owner of the block, who in turn is responsible for things like insurance and exterior maintenance.

It is possible for leaseholders to purchase the Freehold jointly if agreement can be reached, but this is rarely an easy thing to implement.

The Leasehold system has long been ripe for exploitation and the long awaited ban on new leasehold properties in England and Wales is unlikely to come into force until after the next election. Which probably won’t do much to help buyers and sellers of existing flats.

There is a long history of scandals and controversies associated with this form of ownership – such as high service charges and ground rents and massive bills, plus major problems with serious cladding issues, expensive lease extensions and difficulty buying freeholds.

Flat values and other problems

The upshot of all these issues with flats is that their values have performed very poorly over time compared to houses.  Zoopla research shows that the average price of a UK house in June was up 43% since 2016  whereas flats have only increased by 10% over the last 10 years.

Another consequence of all this complexity is that  flats normally take a lot longer to sell than houses. One reason for this is because of the imbalance in some cases between buyers and sellers.  Flats tend to appeal more to first-time buyers because they are cheaper and more affordable.  But a lot of owners are property investment businesses with little urgency to move, so sale prices may be too high, with less flexibility to achieve a sale, keeping flats out of reach for many potential buyers.

Arranging a mortgage can also be more problematic with flats because lenders have more restrictive lending rules, particularly where leases are short (ie 80 years or less) or flats in commercial or retail buildings (ie over shops).

They may decline to lend altogether, or attached strict conditions for repairs, or limit the loan-to-value ratio to only 75% forcing buyers to come up with more cash – which they may not have.

Surveyors carrying out mortgage valuations are conscious of these risks and tend to take a very cautious approach. And in cases where surveyors down-value flats it can blow finely balanced mortgage calculations out of the water.

To avoid this it’s important that the agreed sale price is not on the high side compared to other recent sales of similar flats in the same postcode area. It may help to present the surveyor doing the valuation with a list of comparable evidence to justify the agreed sale price.

Check out this article for Tips On How To Buy & Sell Flats. 

See Rightsurvey.co.uk for a quick guide to valuation and survey prices

We would always recommend using RICS certified surveyors in every instance – don’t get caught out, get instant quotes for RICS surveyors here.