In my latest blog post I discussed buying my first home on my own which was a flat and what I did to get there. Needless to say there have been some really great and bad things that happened with having the flat from an AWOL developer, drug dealers and extortionate charges, but we roll.
Whilst the good has outweighed the bad for me, for anyone who is looking at buying a flat for their first home or looking to do a buy to let, then keep reading for the pros and cons of buying a flat in the UK.
What Are The Cons of Buying A Flat In The UK?
I thought I’d kick off with the cons so we can end it on high, right? Here goes..
Leasehold – Time Left On The Lease
The time left on the lease is really important when purchasing as a small amount of time remaining on a lease can impact whether mortgage lenders will lend on the property.
Having a short lease, under 80 years can decrease both the interest and the value of the property. This should be the number 1 thing you check out when looking at flats before you consider going any further with them.
You Have Additional Costs On Top of Your Mortgage
The majority of flats in the UK are a leasehold property. Unlike houses that are freehold, this means that you don’t have ownership of the entire property and you enter into a contract with the freeholder, essentially you own the property, but not the land it’s on.
This means that not only do you have your standard monthly mortgage payments, but you also have a ground rent charge and a service charge that is due to the freeholder each year.
What Is Ground Rent?
As the freeholder holds the lease for the property, the ground rent is the rent which is owed to the freeholder each year. The amount will be laid out in the lease, and this is a really important one to check before you sign the dotted lines.
£50 per year seems to be the industry average, however, I was paying £250 a year which is considered a lot for a flat. This will vary from property to property, but all these extra costs really do add up.
The issue with onerous ground rent levels is a huge problem with buying and selling leasehold properties currently. Ground rent that exceeds £250 outside of London, or will in the near future could cause issues with getting a mortgage, and the future saleability of the flat. On June 30th 2022 new laws will pass that ground rent will be banned on new leases, so if you are in the process of purchasing, follow the advice of your solicitor and try to wait until this date has passed.
What Is The Service Charge?
A service charge is again paid to the leaseholder to provide the relevant servicing to the property. This generally includes your share of building insurance, cleaning services, management fee (accountancy), servicing costs (lifts) and a sinking fund. The sinking fund is used for things that haven’t necessarily been budgeted for but things that could go wrong, such as drains, structural issues, additional cleaning where the money might be needed.
Trying to say what the average service charge you might expect to pay for a flat in the UK is like saying how long is a piece of string. They vary greatly and vastly, however, the cost of the service charge is likely to be a lot higher in a big block of apartments where there is more area to be serviced.
Having a lift in the building will also increase that service charge. I had one flat in a property of 5 and it did sometimes feel like they charged whatever they liked, it ranged between £600-£1,000 for the year. Once an official management company took over we knew where we stood a bit more with what they would be charging, but you’re often paying out for things that might not even exist.
There’s no denying that service charge is the most annoying aspect of owning a flat. No one buys a leasehold to not make money from it and it’s key to understanding this. Management companies will overcharge and charge for things such as guttering, window cleaning, drains work that might not ever happen. They state it will get carried across to a ‘sinking fund’ that will get called upon when needed, but it rarely happens from my experience.
When you are looking at purchasing a flat you need to be clear with what the additional costs are that you might incur, leases will also stipulate when and by what % they can be increased every x amount of years, so it’s important to pay attention to that too.
Be Mindful of Where The Flat Is Positioned
Many flat blocks mean that you you might be positioned mid level or have someone living underneath you. Having someone above you means that you will hear some level of noise. Lockdown whilst having some use their flat above you as a gym? Don’t go there.
Be Mindful of Air BnB Flats
You’ll most likely also have to share a communal hallway with other residents or airbnb guests… Airbnb is something to really be mindful of if you are buying a flat to live there. If the flat is in a visitor hotspot be wary of this. 3 out of the 5 properties in my building were airbnb, whilst most of the time it’s fine, it does feel like there is people coming and going constantly throughout your home and they are not as respectful as if they lived there.
In all honestly, this was probably one of the worst things come the end as new people were coming and going from all over the country during lockdown and it just didn’t feel safe. You will be sharing your space with other people in a flat, if your neighbours are nice then perfect, but that can’t always be guaranteed with a flat.
What Are The Pros of Buying A Flat In The UK?
Enough of the doom and gloom, there really are some serious pros of buying a flat too. The main one being;
Flats Are More Affordable
In general, flats are cheaper than houses. This makes them more attractive to both first time buyers, small families and those that are wanting to get a buy to let investment. This means a smaller deposit and an easier way to get onto the property ladder which is exactly what I did. A flat is a great stepping stone onto another property in the future.
This is also location specific, in some places such as London, buying a flat is realistically the only way of ever getting onto the property ladder in some cases.
They Can Be More Secure
Modern apartment blocks offer great security with video intercom and gated access. Whilst this can’t be said for all flats, they can offer more security which means you don’t have to pay for additional security systems to keep both yourself and the property secure.
Easier To Manage
It really is personal preference and your circumstances when it comes to buying a house or flat. But a flat really can be much easier to manage than a house for someone that is strapped for time. No garden means no maintenance, a flat is usually smaller to clean and look after, and the property itself is managed and looked after by the management company. You just pay your service charge out to them each year and you don’t need to worry about it again.
Houses Are Freehold
What comes with having a freehold property means that when your roof starts leaking, damp sets in and the gutter falls off your property, you have to sort it. Whilst flats have to pay a yearly service charge fee, when things go wrong the leaseholder is the one that has to get it sorted and you owe no further money.
Owning a house can bring unpredictable costs that you have to pay for to get sorted asap to limit any further damage to your home. However, you should also have monthly building insurance that you pay for on the house that should be able to help out during certain instances.
For me, the main debate when it comes down to buying a house or flat is the leasehold vs freehold debate. There really is pros and cons for each, but ultimately it is your circumstances that will dictate what is more suitable for you.
From a first time buyer of a flat I would say that I have learnt A LOT and made lots of mistakes from the purchase, but it WAS my only way onto the property ladder at the time, and it suited my situation living on my own perfectly. There are many pros and cons of buying a flat, but it’s important to make a balanced decision. If you’re not sure what would suit your budget and circumstances more, I would recommend seeking advice from a mortgage adviser before you begin your search.
Before You Go…
If you’re seriously considering purchasing a leasehold property, if you read one more article make it this one. From my experience owning and selling a leasehold property I tell all and why I would never buy a flat again…
