If you’re looking to buy property, a flat could prove a more affordable option. Figures from the Land Registry show purchasing a maisonette or flat in England is now cheaper than a year ago. In comparison, the cost of a semi-detached home is rising fastest.
While in 2018 house prices in the UK overall increased by 2.5%, apartments actually saw a 0.4% fall. The cost of buying a flat was £226,246, after experiencing an £883 year-on-year fall. In contrast, the average home in the UK cost £231,000, following a £6,000 rise over the course of 2016.
While the dip may seem small, it can offer an opportunity to get on the housing ladder or make a second step while prices aren’t climbing. The fall in prices may also indicate less buyer interest in purchasing a flat, making it more likely that you’ll be able to get an offer accepted that’s below the asking price.
Why choose a flat?
There are many reasons why a flat might be appealing. Often, if you want to live in the centre of a metropolitan area, they’re the only option for aspiring homeowners. An apartment can be an excellent starting point for singles and couples just stepping on to the housing ladder.
In many cases, purchasing a flat is likely to see your outgoings reduced; often rent is more expensive than mortgage repayments, particularly with interest rates currently low. On top of this, if a flat is cheaper than the homes available in the same area, it may be the most cost-effective option. Of course, flats come with additional costs that need to be factored in too, which are explored below.
The drawbacks when purchasing an apartment
Whatever attracts you to purchasing a flat, from the location to the prices, it’s important to ensure you understand the potential drawbacks before you start searching the property market.
- Leasehold: Most flats are sold under leasehold terms. This means you don’t own the land that your home is built on; once a lease is up the property would be returned to the freeholder. Typically, you will be able to extend the lease if you can come to an agreement with the freehold, but this is an added expense. There are also sometimes opportunities to purchase the freehold, though in a flat this will often have to be done jointly with other owners.
A leasehold can also make it more difficult to secure a mortgage. Most lenders won’t offer a mortgage on properties with a lease that’s less than 70 years and will often want the leasehold to extend at least 40 years after the end of your mortgage term.
- Ground rent: As you’re unlikely to own the freehold in a flat, you’ll need to pay ground rent. This will be a monthly outgoing that’s paid to the freeholder. The cost of ground rent can vary enormously, with some that are just peppercorn rates. If you’re thinking of purchasing a flat, it’s critical that you look at ground rents and how they’ll increase. Some leaseholders have found that their ground rent doubles every decade, potentially placing them under financial pressure in the future.
- Maintenance charges: Much like ground rents, maintenance charges can vary. This is the amount you pay for the overall maintenance of the building and communal areas. Usually, it’s paid as an annual fee. In many cases, a managing agent will be responsible for setting out the work to be completed and how much is due.
- Potential restrictions: Leaseholds may also come with potential restrictions. In some cases, these won’t affect your lifestyle or decision at all, but in others, they can have an impact and may even cost you money. Some leaseholds, for example, will not allow you to have pets or will require you to get permission from the freeholder before you carry out any aesthetic changes, such as installing a new kitchen.
Whether it’s a flat or house that catches your eye when searching the property market, we’re here to help you through the mortgage process. If you have any questions, please contact us.