Smart city centre apartments are losing popularity with buy-to-let landlords thanks to soaring service charges.
The average cost of service charges on a leasehold home in England was £2,300 at the end of last year - an 11 per cent increase from a year earlier, according to new data from property consultants Hamptons.
According to official data published in the English Housing Survey, service charges affect 4 million leasehold properties in England, 1.5 million of which are apartments.
Service charges have also revealed a north-south divide.
Landlords in the Northeast have seen service charges surge by 60 percent in the past five years, compared with landlords in the South, where the charges have risen by a more modest 27 percent over the same period.
Researchers argue that the regional disparity arises from developers building more city centre blocks with gyms, lifts, and concierge facilities in the Midlands and North. Another factor other than amenities pushing up service charges is apartment size.
Good amenities come at a price
Landlords pay service charges proportionate to the apartment floor area in the block. Owners of one-bedroom apartments pay an average of £2,000, rising to £2,300 for a two-bedroom apartment and almost £3,000 for a three-bedroom apartment.
Properties in blocks with lifts command a 16 percent service charge premium compared to those without. A gym adds a 24 percent premium, while a concierge service results in a 39 percent rise.
Average annual leasehold service charges by region
Region
Average annual service charge
Five-year increase
North East
£2,048
60.90%
North West
£2,136
57.60%
Yorkshire & Humber
£2,053
40.20%
London
£2,633
39.00%
East Midlands
£2,078
28.50%
South East
£2,102
26.30%
Eastern
£2,070
23.90%
South West
£2,028
21.50%
Wales
£1,767
20.80%
West Midlands
£2,114
18.60%
England & Wales
£2,300
33.90%
Source: Hamptons
Right to Manage on the way
Meanwhile, the government will introduce changes to improve the lives of leaseholders on March 3, when secondary legislation for the Right to Manage measures in the Leasehold and Freehold Reform Act 2024 comes into force.
The new rules will empower leaseholders to take control of their buildings more easily. They will be able to control how their service charges are spent and will no longer need to cover their freeholder's legal fees when making a Right to Manage claim. This could potentially save leaseholders up to £3,000 for the most costly claims and reduce the incentive for landlords to obstruct the process.
Announcing the changes, Pennycook said: "Our modernisation of the system sits alongside further reforms to improve the lives of leasehold homeowners across the country, allowing them to more easily and cheaply take control of the buildings they live in and clamp down on unreasonable or extortionate charges."
The government has promised to abolish leaseholds but has yet to put the necessary legislation before Parliament.
