Service charges for flats in England and Wales are approaching a significant shift, with sub £1,000 annual fees becoming increasingly rare. Hamptons reports that only 19% of flats now come with service charges under £1,000, with expectations that such offerings will disappear within the next decade.
David Fell, lead analyst at Hamptons, commented on the impact of rising service charges on buyers: “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.”
The average annual service charge for a flat has surged by 8.4% or £175 from Q1 2023 to Q1 2024, reaching £2,247. This increase is more than twice the rate of inflation and marks the fastest rate of annual growth since records began in 2016. The rise in costs is attributed to inflation in goods and services which affects the forecasted running costs for buildings.
Service charges are escalating across all flat sizes, with the average charge for a three-bedroom flat surpassing £3,000 for the first time. In the capital, the average annual service charge is now £2,581, reflecting the higher cost of living and more complex building maintenance in London.
First-time buyers are particularly affected, now representing 36% of flat purchasers in Q1 2024, the highest since records began. This shift indicates a growing burden of service charges on top of mortgage payments, potentially affecting the purchasing power of new buyers.
