The average annual service charge for flats in England and Wales has increased by 8.0% over the past year, reaching £1,431, according to data from Hamptons.
Since 2018, service charges for flats have risen by 51.7%, primarily due to the introduction of additional fire safety measures. This means that leaseholders are expected to pay a total of £7.6bn in service charges in 2023.
The average one-bed flat incurs an annual charge of £1,287, while a two-bed flat sees an average charge of £1,426, and a three-bed flat has an average charge of £1,876.
Service charges in London are notably higher, sitting 24% above the England & Wales average. In the capital, 20% of residents pay more than £4,000 annually, compared to 11% across the country.
The size of the block also impacts service charges, with blocks of 20 or more units having an average service charge of £2,606 per year, which is 99% higher than in blocks of five or fewer units.
David Fell, Lead Analyst at Hamptons, said: “The last few years have brought some degree of relief for leaseholders with increases in service charges tracking inflation. The big hike in service charges came nearly five years ago and was wholly a product of historic fire safety failures in larger blocks.”
Fell further noted: “More recently, leaseholder premiums have been bumped up by the increased cost of building materials and insurance. Energy-intensive construction products and anything containing a microchip are, however, still recording double-digit value increases.”
While recent falls in the cost of some building materials and energy costs should eventually result in lower charges for residents,
Fell highlighted that it may take time for the benefits of falling prices to materialise. Commercial contracts for communal utilities are exempt from price caps, and fixed commercial agreements at higher prices may delay the passing on of savings to leaseholders.
