Do Flats Go Up in Value?

Flats are amongst the most common type of house in the UK.

Especially in city centres, where population density is high.

But there is debate about whether buying a flat is a worthwhile investment.

Keep reading to find out if flats go up in value and more.

How much does a flat cost in the UK?

England

In England, the average flat costs £251,375.

The figure varies widely based on your location in England.

For example, in London, a typical flat will set you back £535,452. In Doncaster, it costs around £141,940.

Scotland

In Scotland, the average flat price is £124,110. Meanwhile, in Wales, a flat costs £135,001 on average.

Northern Ireland

A flat in Northern Ireland costs approximately £155,452. But this figure varies across different towns.

Do flats go up in value?

Yes, flats have a long track record of increasing in value. Certain scenarios cause flats to lose value, but most are preventable.

Over the past decade, the price of a flat has gone up by around 60% in the UK. This is a trend that is consistent in almost every part of the country.

There are some areas where flat values are more volatile. For example, the most affluent areas of London.

In Chelsea and Kensington for instance, property value has declined by 6% in the past 5 years (at the time of writing).

In almost any other location though, flats are an excellent investment. They are extremely likely to increase in value over a five or ten-year period.

Is it a good idea to invest in a flat?

Flats are an excellent investment for many landlords.

In demand

They are the least expensive type of property, making them easier to save up for. Mortgages, bills, and maintenance costs tend to be lower, too.

Flats are always in demand because they are on the lower-end of the market. But there is a larger supply of these around the UK. This means that flats take longer to sell than any other type of property.

For example, 40% of properties in Scotland are flats (compare this with England, at 21%, and Ireland, at 8%, the lowest rate in Europe).

You must be patient when the time arrives to sell your flat for a profit.

Leaseholds

The length of a flat’s leasehold will determine whether you should invest in it.

For example, it is difficult to sell a flat with only 80 years remaining on the lease. You might want to extend the lease before selling.

There are other challenges to keep in mind. Expanding a flat via an extension or turning it into an HMO is difficult. You also cannot control the behaviour of other tenants in the building.

It depends on the circumstances of the flat you’re looking to buy. This includes:

Location
Condition
Price
Lease length
Market conditions.

and more.

Why do flats take longer to sell?

In most parts of the UK, flats take longer to sell because there is a larger supply of them. This means buyers have a greater range of options and can afford to be picky.

In a recession, homeowners tend to downsize. You may see flats become more popular in this situation.

Do retirement flats go up in value?

Unlike other flats, retirement flats do not often increase in value. There is a long track record of people who buy this type of property seeing it decrease in worth as the years go by.

According to MyContinuum, the average new-build retirement home falls 3% in value for each year of ownership.

On websites such as Rightmove and Zoopla, retirement flats are listed at the lowest prices. They can often be on the site for several years without finding a buyer.

(There are ways to increase the chances of them selling quickly but they include reducing the asking price significantly).

Retirement flats can lose value because there are fewer potential buyers. This means that the sellers have far less negotiating power.

Will the service charge increase on a flat?

It is common for service charges to increase year-on-year. Although, this depends on the freeholder.

Most freeholders justify this by keeping the charge in line with inflation.

Before buying a flat, it is worth speaking to residents to see how they feel about the service charge fee.

Your tenancy agreement will often have a clause outlining Service Charge fees. This includes whether the freeholder can increase it every year.

The average annual service charge for a flat in England and Wales is around £1,431 (£119 per month).

However, in some parts of the country, such as London and the south-east, it can be higher by several thousand per year.

What decreases the value of a flat?

Flats typically increase in value, but some scenarios cause its price to dip.

A short lease length reduces the value of your flat. If it drops below 80 years, buyers will struggle to get a mortgage on it. Getting a high price won’t be easy unless you extend the lease.

Allowing the flat’s condition to decline can decrease its value. For example, damp or mould in the property, or broken windows or doors, are a negative.

If your flat has sitting tenants, then this can devalue it. Especially if the tenancy agreement enables them to live there forever.

Bad neighbours will be a major negative, especially if they are above the flat. And being in a bad location will also damage your chances of attracting buyers.

Buyers want to ensure their investment is a ‘sure thing’ before putting down their money.

Does buying the freehold increase my flat’s value?

If you buy a share of freehold, you can extend your lease, making your property more valuable and attractive.

In this instance, you can also dictate your service charge fees.

Keep in mind that ‘freehold flats’ are a different thing altogether. They can cause legal headaches and confusion.

Almost all lenders do not offer on these types of properties. They will only offer if the circumstances are clear. This includes where the property boundaries begin and end.