Is the flat market dead?

Hiten Ganatra, managing director at Visionary Finance
The flat market is not dead but is becoming increasingly split in two. Well-managed flats with long leases, sensible service charges and no outstanding building safety or cladding issues are still selling. Where the market is slowing is on properties with questions around such issues, because buyers and lenders are, understandably, more cautious.

There is a strong value argument in favour of flats. The price gap between houses and flats is the widest it has been for around 30 years, with house prices up by roughly 43% since 2016 compared with just 10% for flats—flats now offer some of the best relative value we have seen in a generation. In London and the South East in particular, they remain a main route into homeownership.

The market is not disappearing but becoming more selective, and flats that are straightforward to own, finance and sell are likely to stand out even more.

Ben Allen, business development manager at E18 Specialist Property Finance

I wouldn't describe the whole market as dead, but there is definitely more resistance, particularly where a flat has something that makes a buyer think twice. Service charges are a big one. Buyers aren't looking only at the mortgage payment; they're looking at the total monthly cost of owning. A flat might appear affordable based on the purchase price but, once you add a substantial service charge, ground rent and other costs, the proposition can look very different.

There is a significant difference between a good and a difficult flat. A well-located property with a sensible service charge, a long lease and no major building issues can be perfectly marketable. It's those with one or more complications where transactions become much harder.
 

Lucy Waters, managing director at Aria Finance

Flats tend to come to market in much greater numbers than houses, so there is more stock competing for buyers.

Affordability is an issue for first-time buyers, who are an important part of the flat market. Higher interest rates have reduced borrowing capacity, while the removal of help to buy has taken away another source of support.

Buyers are also looking much more closely at service charges, lease lengths and potential major works. At the same time, we’re seeing fewer new-build flats coming through, partly because slower sales and increased building safety requirements have made development more challenging.

I think this is a cycle that will correct over time. The market is adjusting rather than flats becoming permanently undesirable.

Mark Harris, chief executive at SPF Private Clients

First-time buyers still account for the bulk of activity but with prices, particularly of flats, falling in some areas, the urgency to buy is not there. Rates higher than forecast at the start of the year are a further deterrent.

Demand for one- and two-bed flats has fallen whereas demand for three- or even four-bed houses by first-time buyers has grown. The cost of buying is so high that first-time buyers are increasingly avoiding the traditional starter home or flat and jumping up the ladder to remove the need to move every few years.

Cladding and leasehold issues are making flats less attractive. Smaller flats were often bought by landlords but regulatory changes mean many are selling up, and that usually reliable market for flats is not what it was.

Read the full story in B&C Magazine, here.