Fewer than one-fifth of flats now offer charges under £1,000
Data from Hampton’s Service Charge Index indicates that in the first quarter of 2024, only 19% of flats featured a service charge less than £1,000 - a significant drop from 33% in 2016.
The latest figures from Hamptons, which is a leading residential estate agent and property services company, operating in London and the South of the UK, reveal that the average service charge for a flat reached £2,247 per annum by the first quarter of 2024, marking an 8.4% increase or an additional £175 from the previous year.
This growth rate is more than double the general rate of inflation and is the highest annual increase recorded since data collection began in 2016. Currently, just 14% of flats in London have an annual service charge below the £1,000 threshold.
The cost increments are attributed to rising inflation rates, which typically impact the service charges with a delay due to their nature of being estimated based on anticipated costs. In London, service charges are particularly high, averaging £2,581, reflecting the city's higher cost of living and the complex maintenance needs of larger urban buildings.
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First-time buyers now form the largest group purchasing flats. They account for 36% of such transactions in the first quarter of 2024, surpassing landlords who were the majority before 2016. This shift indicates that more new buyers are shouldering service charges on top of their mortgage payments, potentially affecting their borrowing capacity.
“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,” Hamptons lead analyst David Fell said, adding that higher mortgage rates have financially squeezed many potential flat buyers, limiting the amount they can borrow.
In addition, Fell explained that due to inflation, actual service charges are often higher than initially estimated, impacting the financial planning of buyers.
“Service charges are usually based on forecasted running costs for the year ahead,” Fell said. “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.”
