Long term negative equity problem?

Long term negative equity problem?

9:20 AM, 26th September 2022, About A year ago 8

Text Size

Hi, I have had a one bed flat for the last ten years, but it has not increased in value. The last tenant been in it for 4 years now.

The rent has not increased for at least 7 years.

So, negative equity ever since.

I cannot change BTL mortgage so interest rates have gone up 7 times this year. I’m only just scraping by financially.

Service charge on property is also extortionate in comparison!

Similar properties in area selling at loss so decided not to sell as mortgage outstanding is more than the property is worth.

Need advice if anything I can do to get out of this situation.

No profit being made, just costs being paid.



Share This Article


Judith Wordsworth

11:52 AM, 26th September 2022, About A year ago

Personally I cannot believe that the value hasn’t risen in 10 years. You must have paid well over the odds for it.
As for the service charge if there is a lift and third party management with gardeners, cleaners etc etc then service charges are usually high and this would have been known when you bought
What loan to value did you do?

Dennis Forrest

12:13 PM, 26th September 2022, About A year ago

Why didn't you increase the rent 4 years ago when the last tenant left?

Brian Jackson

13:10 PM, 26th September 2022, About A year ago

This happened to me in 2007. I paid £116000 for a 2 bed flat off plan. 36 flats in the block some paying more than me. Interest only mortgage and reasonable rent.
paid a surplus every month. Until mortgage rate changed along with lender changing.
No option- given repayment mortgage at £870 pcm
Rental was £450 pcm service charge on top.
After ten years mortgage outstanding was slightly less than value of property.I struggled to sell eventually selling for £55,000 giving me £7000 cash surplus.
I am afraid in my view this is your option.
Bite the bullet.

Reluctant Landlord

14:34 PM, 26th September 2022, About A year ago

increase the rent immediately to market rate then put property on the market. Sounds like you are in a bit of a no win situation so cut your losses now as there are so many unknowns going forward. Be prepared to take a loss just to stop the problem getting worse.


15:09 PM, 26th September 2022, About A year ago

Reply to the comment left by Judith Wordsworth at 26/09/2022 - 11:52There are places where this is true. Not sure why this means negative equity though, unless the OP means in terms of income rather than property value


18:00 PM, 26th September 2022, About A year ago

A really difficult situation. If you sell at a loss, you would still owe your lender the balance, but I don't know how that would be handled. Bankruptcy is the final solution, but there must be someone on here who can provide better options.

Dennis Forrest

18:54 PM, 26th September 2022, About A year ago

Perhaps cladding or remedial fire safety work is needed? Has the block of flats got a valid EWS1 certificate? Although freehold houses have nearly always gone up in value leasehold flats with lots of adverse comments compounded by cladding and other safety issues has meant that some flats have not gone up much at all. One of my flats, a modern 2 bedroom flat bought in 2017 for £325,000 had at one time gone up to nearly £400,000 but then after the cladding issues started brought the price back down to around £335,000 and yes this is in spite of us having a EWS1 certificate.


11:24 AM, 27th September 2022, About A year ago

It really is not so difficult to believe or as rare as you might think. All 133 apartments in our development are in the same position. We are talking about an iconic building -a mill in the North of England converted into apartments and sold in 2005. Has depreciated in value ever since. Two examples -colleague bought a 3 bed for £179,000, sold it for £75,000 in 2016. We bought a 2 bed in 2005 for £136,000 and have been unable to sell even at £65,000. How could we when a 3 bed top floor with views and balcony goes for that? Most end up at auction or going for these prices through estate agents.
What is causing it? Any and all of the following …
The significant contribution to the sinking fund when selling
The high cost of the LPE1 pack when selling £640
High Service Charges based on square footage
Annual surprises in the budget - for example costs of refuse disposal. Used to be around £4,000pa, actual costs last year were £12,000. Why? Working from home in Covid, more packing from deliveries to dispose of, similarly more abandoned furniture such as sofas and wardrobes from the high turnover of renters.
Virtually no owner occupiers now so 99.9% renters. Average rent £520pcm for a 2 bed. In answer to a previous poster’s question-sometimes the rent just can’t be increased.
Over the years, monthly mortgage, service charges, Ground Rent, deficit budget payment to the Management Company when it regularly overspends, covering the voids, replacing built in electricals has meant paying the monthly mortgage has been tight -so we paid it off. It is saying something when the outstanding mortgage is greater than the value of a property after 17 years of investing in it.
Mortgages no longer available for properties in the development so cash buyers only- again affecting prices. See probable reason below.
The most worrying of all the issues is Ground Rent. Now way beyond the magic figure of £250pa with another rise due 2025. Increases every 10 years using totally incomprehensible formula, linked to RPI and requiring knowledge of base rates at given points in time so impossible to predict before purchasing. Mortgage lenders won’t touch these apartments owing to the implications of how £250 GR ( outside London) impacts on their asset and there is no legislation in sight for people with existing leases. The new builds / leases no longer have this issue of course. So if any of the above issues apply, I am not surprised the original poster is in this situation.

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now