Flat owners in London feel the squeeze as service charges balloon
The average annual service charge on London flats has risen close to 10 per cent over the last 12 months, piling further pressure on cash strapped city dwellers.
According to a new study by real estate agent Hamptons, the average fee leaseholders in London paid to the managers of buildings for services such as maintenance and building insurance has ballooned by nine per cent in the last year to £2,581.
Service charges in London are now higher than anywhere else in the country. The charge has risen by an average of 8.4 per cent across the rest of England.
“This [increase] reflects the higher cost of living in the capital and the fact that larger more complex city buildings tend to come with higher running costs over their lifetime,” Hamptons said.
High fees are set to become the norm as the group warned the number of flats with a service charge of less than £1,000 is on course to reach zero within 10 years.
Squeezed first-time buyers are becoming more exposed to rising service charges since they have been purchasing the largest share of flats since 2015 when Hamptons records began.
A record 36 per cent of flats were bought by a first-time buyer in the first quarter of 2024.
David Fell, Lead Analyst at Hamptons, 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: “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.”
“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.”
A separate report by Zoopla showed that falling prices in the capital are due to higher-than-average mortgage rates and stamp duty.
In March, house prices in London fell by 0.4 per cent year-on-year to £535,700.
London buyers are seeing the highest average difference in annual mortgage repayments, rising £7,500 since 2021, the leading property site has warned.
Property owners in London are paying 48 per cent more than what they paid three years ago on their mortgage, with the average household contributing over £23,000 to payments.