Bag yourself a property nest egg bargain as flat prices plummet: With sellers slashing prices by up to 35 per cent, how to spot the ultimate deals – and the red flags of an unsellable money pit

Britons have fallen out of love with leasehold flats. Many owners are selling at losses and countless horror stories are making would-be buyers steer well clear.

Flats were once the popular stepping stone onto the property ladder. Now first-time buyers are avoiding them and going straight from renting to buying their ‘forever home.’

Two thirds of first-time buyer mortgage customers bought a house in 2025, rather than a flat, according to Santander and Barclays says it is seeing an increasing preference for houses among its first-time buyer customer base.

Flats were also once the popular choice for landlords. But buy-to-let is no longer the gravy train it once was. 

The total value of privately rented property nosedived last year by 5.1 per cent, or £48billion, according to the estate agent Savills, the biggest drop this century – suggesting the sector is shrinking.

Bad news surrounds flats like a bad smell surrounds an abattoir with tales of flat owners trapped in unmortgageable, unsellable apartments – some still wrapped in unsafe cladding.

Elsewhere, homeowners are being held to ransom by freeholders and managing agents via ever-increasing service charges, ground rents and hidden insurance commissions.

But amid the negativity and fear around leasehold flats, some argue there is an opportunity to be had.

We spoke to experts in the know about whether leasehold flats can still represent a ‘good buy’ and what they need to look out for before committing to one.  

Flats look cheap 

Flat prices are now out of kilter with the wider market meaning arguably from a historical perspective they look cheap.

In December 2016, the average price of a flat was £155,726, according to Land Registry data, compared to roughly £153,491 for a terraced house making flats marginally more expensive 10 years ago.

A decade later, and the average price of a flat is £192,826 compared to £229,449 for the average terraced house. Terraced houses are now £36,623 more expensive.

It also means that the typical flat has risen by less than 24 per cent over the past decade compared to the typical terraced house, which is up almost 50 per cent.

Rob Dix co-founder of Property Hub says while the last decade has been hard on flat owners, it does not mean that flats going forward will be a bad investment.

‘Circumstances have been uniquely bad for flats for the last five to 10 years so they just haven’t had the growth,’ he says.

‘The interesting thing to watch is whether the gap that’s opened up between relative house and flat prices over that time reverts to the average or stays as it is. I suspect the former, but we’ll have to wait and see.’

James Nightingall, founder of property search service HomeFinder AI thinks flats in the capital look particularly good value right now – even from a buy-to-let perspective.

‘Many London flats are now trading at a significant discount to houses and previous price peaks, creating opportunities for long-term investors. 

‘Well-located units with strong rental demand can deliver solid return on investment and are often easier to manage and maintain. 

‘Negative sentiment around leasehold has weighed on prices, but the fundamentals of central London living. i.e., jobs, transport and amenities remain unchanged.’

Leasehold reform is on its way

Leaseholders are hoping that proposed reforms will, in time, make it cheaper and easier for them to extend their leases or club together with neighbours to buy the freehold.

The Bill should improve the experience for leaseholders granting them greater security and control over their homes enabling them to tackle abuse and bad practices in the leasehold system. 

For example, it promises to give leaseholders extra rights to challenge management fees and the greater ability to manage their own buildings. 

It should make it easier for existing leaseholders to convert to commonhold and ban the use of leasehold for most new flats.

It will also abolish the threat of forfeiture, which is where a freeholder can effectively take back a leaseholder’s home and claim all their equity in doing so. 

This can be forced upon leaseholders who fail or refuse to pay their service charges or ground rent.

While none of this is guaranteed, pressure is growing on the government to deliver on its promise to ‘call an end to the feudal leasehold system.’

‘Potential reforms could help restore confidence in leasehold flats,’ says James Nightingall, founder of property search service HomeFinder AI.

‘Greater transparency around costs and simpler lease extension rules would reduce uncertainty for buyers, which could support demand and help unlock value for many flat owners.’

Ground rent to be capped at £250

Ground rents have arguably been a major factor in depressing leasehold flat valuations. 

Most leasehold flat owners are charged a ground rent, though these were recently banned on all new leasehold flats being sold for the first time.

Owners of leasehold property pay ground rent to the freeholder. Some see it as controversial as it is often a nominal charge and there is no service given by freeholders in return.

Ground rents often rise in line with the retail price index (RPI) inflation rate and change every five, 10 or 20 years. 

This means someone who bought a flat with a £600 annual ground rent in 2016 would see their ground rent rise to around £950 this year. In 10 years it will rise again and they are entirely at the mercy of what happens to inflation between now and then.

Other ground rents double every 10, 20 or 25 years. Under a 10 year clause, that would see someone paying £600 in 2016 double to £1,200 this year, then in 2036, their ground rent would rise to £2,400 and then to £4,800 in 2046 and so on.

These types of ground rents have become red flags to lenders and often render homes unmortgageable and unsellable.

However, earlier this year, the government announced plans to cap all ground rents at £250 a year, with it falling to a ‘peppercorn’ or virtually zero in 40 years’ time.

‘For ground rent, anything above £250-300 annually should make you cautious, and doubling ground rents are a massive red flag,’ warns Dix.

‘Recent reforms have outlawed ground rent completely for new leases, which is a very positive development. That is a real improvement that removes a risk, saves money, and makes new flats a better investment than previously.

‘One of the most significant reforms being proposed is capping of ground rent on older leases at £250 a year – which would be a big result. 

‘Although this isn’t guaranteed to happen, the direction of travel is much more positive.’ 

Service charges to stop surging…

The service charge is typically the largest cost leaseholders are subjected to on an annual basis – and this tends to rise over time to take inflation into account.

These are annual fees that cover things like cleaning, repairs and bills in communal areas such as hallways, safety checks, buildings insurance and the services of the managing agents. For some apartments, it can also include things like a gym, concierge and parking. 

The rise in costs has been particularly brutal in recent years as a direct consequence of the rise in the cost of living, insurance premiums and new regulations.

Service charges have increased by an average of 41 per cent between 2019 and 2024, according to The Property Institute. It says the average leaseholder is now paying £3,634 per annum. 

It also revealed that between 2019 and 2024, average building insurance costs for leaseholders in blocks taller than 18 metres rose 92 per cent, according to the Property Institute. Those in buildings below 18 metres saw premiums rise 69 per cent.

It said the utilities element of service charge bills had risen 73 per cent, professional fees were up 69 per cent, health and safety costs were up 40 per cent, on-site staff costs had risen 37 per cent and repair and maintenance costs were up 36 per cent.

Some of these added costs are a result of changes freeholders or managing agents must make to comply with the requirements of the Building Safety Act, introduced in the wake of the cladding scandal.

A spokesperson for the Residential Freehold Association told This is Money: ‘The introduction of the Building Safety Act and cost of complying with the new regime has led to rising charges for leaseholders, including average costs incurred rising from just over £5,000 in 2023, to an average of over £28,000 in 2024.’

The CPI rate of inflation is expected to fall to 2 per cent in late 2026 according to the Office for Budget Responsibility (OBR) where it is broadly expected to stay until 2030.

If that forecast proves to be true one would expect service charges to stabilise and not surge much higher over the coming years. 

James Nightingall of HomeFinder AI says: ‘Service charge increases over the past few years have largely reflected wider inflation, such as energy, insurance and labour costs, all of which rose sharply. 

‘If inflation stabilises as forecast, we should start to see those increases moderate.’

However, 2 per cent inflation could start to look increasingly unlikely to become a reality the longer the conflict in the Middle East drags on. 

If inflation starts to rise, largely as a result of trade disruption and rising energy prices, then we could start seeing inflation and service charge costs spike.

Cladding issues are easing

After the Grenfell Fire in 2017, it became clear that many apartment blocks had serious fire risk concerns that needed sorting.

This resulted in leaseholders being hit with huge remediation bills – sometimes in the tens of thousands.

‘The whole crisis created a stigma around flats,’ explains Dix. ‘Lenders became incredibly cautious and even some buildings that were not affected by cladding at all needed extra checks and certificates.

‘Some flat owners found themselves completely trapped; unable to sell or remortgage because no one would touch their building.’

However, as a result of government action, all residential buildings above 11 metres in England now have a pathway to fix unsafe cladding, through either a taxpayer-funded scheme or developer-funded scheme. 

Where developers or building owners are not currently funding cladding repairs, the government has committed £5.1 billion to ensure that people are safe and feel safe in their homes. 

And developers have now assumed direct responsibility for remediating all life-critical fire safety defects in more than 2,000 buildings. 

Of the 4,191 buildings identified with unsafe cladding so far, 2,195 have started or completed remediation works, of which 1,513 have completed remediation works, according to the latest government figures.

‘There are still buildings caught in limbo and it’s far from a perfect situation but the phase of uncertainty that stopped so many sales and spooked so many lenders is gradually lifting.’

‘Race for space’ house price boom reversing

The property rulebook was rewritten during the pandemic induced ‘race for space’ following the outbreak of Covid in Britain in 2020.

Inspired by the idea of permanent working from home, many flat owners sold up and moved out to rural and even remote areas. 

However, now the pendulum is swinging back and many people are once again heading for the bright lights of cities again – where most of the leasehold flat market exists.

Dix says: ‘When Covid hit, everyone wanted more space, working from home meant that everybody wanted an office. Lockdowns meant everybody wanted gardens.

‘City centre flats that had been popular suddenly felt cramped and undesirable. There was mass exodus to the suburbs and beyond.

‘But that is now reversing now. People are moving back to cities and being close to work really matters again and demand for located flats is picking back up.’

So should people still consider a leasehold flat?

There are 3.75 million leasehold flats in England and Wales, according to the latest Government figures. 

Ultimately, for many people who either want to – or need to – buy a flat, leasehold is a fact of life. 

However, despite all the criticism, leasehold flats are not automatically bad, according to Dix, they just need more scrutiny.

He argues that buyers just need to fully understand what they’re getting into before they pile in their life savings. 

‘First, check the lease length carefully,’ he says, ‘anything under 80 years gets expensive to extend due to ‘marriage value’  – though reforms are planning to address this. 

‘Ideally we recommend buying with a term of at least 100 years remaining, ‘this will give you 20 years until it starts to become an issue for lending purposes. 

‘Scrutinise the service charges – not just the current amount, but how they’ve changed over recent years. 

‘Understand exactly what the service charge covers and whether there’s a sinking fund for major works. 

‘Check the level of ground rent level and how it’s reviewed. Look at the management company’s reputation, and review any planned major works that could result in big bills soon.’

For those buying a new build, there won’t be a service charge history to look at, which means buyers are reliant on the estimate the developer provides – which may not be accurate. 

In this case, the best thing to do is research the developer and management company to see how well they manage other projects, according to Dix.

He adds: ‘If you’re particularly concerned, avoid buildings with amenities that are likely to be expensive to run.

‘The positive with new build flats is you’ll get a new lease of typically at least 150 years and sometimes up to 999, so the length will never become an issue during your ownership.’