London and North West emerge as leasehold hotspots

Detailed research of property purchases in England and Wales reveals how the availability of freehold properties is declining in some areas at the expense of a rise in leasehold properties which can take longer to purchase and come with extra costs.

Conveyancing service provider, My Home Move, analysed over 20 million property transaction records in England and Wales using Land Registry data and found that across the two countries, an average of 15% of residential properties are leasehold.

This proportion increases to 53% and 46% of homes in London and Manchester respectively posing the question as new developments are built, will a plentiful supply of freehold properties in British cities become a thing of the past?

Developers can make more money from leasehold properties by splitting them into flats and apartments, particularly in areas with a high population density such as city centres where prices are rising fast.

The analysis found that particularly amongst new build developments in inner-cities, leasehold properties have become much more prevalent, making up 90% of housing stock in some of these areas such as London’s N1C postcode and the M15 and M50 postcodes in Manchester.

Doug Crawford, CEO of My Home Move, said: “The redevelopment of England and Wales’ towns and cities over the last 30 years means there are more leasehold properties on the market, as new build apartment blocks are constructed and old warehouses are converted into flats.

“Controversially, even some new build houses in suburban and rural areas are now sold as leasehold properties. The investment has given the countries’ housing stock a very welcome boost, but it also means that buyers are more likely to encounter a leasehold property than ever before.

“While the high proportion of leaseholds in the centre of major cities will shock few developers and estate agents, would-be buyers looking to claim a little piece of the city as their own may be in for surprise.

“Leaseholds make up almost all of the housing stock in some of our cities’ redeveloped districts, and the proportion of leaseholds could grow even more as additional new developments come onto the market.”

Overall, the centres of large cities have a much higher proportion of leasehold properties than freehold. As well as Manchester and London, Liverpool, Newcastle and Birmingham also have areas that come close to the top of the list for the proportion of leasehold properties.

In central London, more than 60% of residential properties in the WC, EC and W postcodes are leasehold. None of the Greater London postcode areas have an average leasehold density of more than 40%. In the capital, West London postcodes have a slightly higher proportion of leaseholds than Eastern ones, possibly because historically they have higher property prices and attract more investment.

However, there are variations amongst cities. For instance, not all parts of Manchester have a high proportion of leaseholds. In the M21 postcode, Chorlton-cum-Hardy, just 14% of properties are leaseholds.

In London’s SE2 postcode which covers Abbey Wood, West Heath, Crossness and Thamesmead, just 14% of properties are leasehold. In the B21 postcode in North Birmingham, just 3% of properties are leasehold.

Berwickshire and rural Wales have some of the lowest proportion of leaseholds in the country.

The analysis is a useful research tool for potential buyers because it indicates if the area they are looking to buy into is a leasehold hotspot. This has implications because leasehold properties often take longer to purchase and come with additional legal obligations and costs. Therefore, house-hunters need to carefully consider this before deciding where to move to.

Doug Crawford added: “Although the distribution of leaseholds may not be even, it is important that knowledge of the differences between the two types of residential tenure is universal.

“Home buyers need to understand that while purchasing leasehold means they own the property, they won’t necessarily own the building or ground on which it is located. As a result of this, leasehold buyers often have to pay ground rent, service charges, and buildings insurance to the building’s owner.”

“Before buying a leasehold, would-be owners need to make sure they know how long is left on the lease and when this will need to be reviewed, and ensure they factor any additional charges into their financial planning. By doing so, buyers can save themselves from any potential shocks further down the line.”