Flat service charges below £1,000 near ‘extinction’

Flat service charges below £1,000 near ‘extinction’

0:02 AM, 7th May 2024, About 2 months ago

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Flat owners in England and Wales are facing a significant financial burden as service charges continue to climb, a report by Hamptons reveals.

It says that the average annual service charge for flats has surged by 8.4% to £2,247, with the number of flats enjoying charges below £1,000 rapidly dwindling.

This dramatic increase is attributed to rising inflation pushing up the cost of building maintenance and services.

Hamptons is also predicting that within the next 10 years, flats with service charges under £1,000 will be virtually non-existent.

‘Buyers are increasingly wary of the additional ongoing cost’

The firm’s lead analyst, David Fell, said: “Rising service charges mean buyers are increasingly wary of the additional ongoing cost to their home purchase and are carefully weighing up the value for money they offer.

“Higher mortgage rates have already financially squeezed many would-be flat buyers, and with more taking on service charges as well, it’s often limiting how much they are able to borrow from the bank.”

He added: “With buyers going through service charge accounts with an increasingly fine toothcomb, they’re more informed than ever about how much they’ll be paying each month and what they’ll be getting back.

“This means the value of flats where the service charge is disproportionate to the services on offer has come under downward pressure.”

First-time buyers are being particularly impacted

The report highlights that first-time buyers are being particularly impacted by this trend at a time when they are downsizing their expectations due to higher mortgage rates.

This means they are increasingly buying flats, which come with the added financial burden of service charges.

A record 36% of flats were bought by first-time buyers in the first quarter of 2024, meaning a growing number of new homeowners are paying significant service charges on top of their mortgages.

Mr Fell said: “Service charges are usually based on forecasted running costs for the year ahead.

“But inflation has been pushing these costs above what was pencilled in, meaning today’s higher bills reflect inflation which has been running hot for much of the last 18 months.”

He adds: “Alongside this, the first generation of city centre flats are now thirty years old and are starting to show their age, often approaching the point when they need an injection of cash.”

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