Thinking about buying or selling a flat? New data shows flats haven’t been keeping up with the rest of the housing market. Here’s what you need to know.

Over the past five years, flats haven’t been the investment they once were. Since 2019, before the pandemic hit, the average price of a flat has only gone up by 14%, reaching £232,400 in June, according to analysis by the FT.

That’s half the growth of houses!

During the same period, house prices shot up by 25%, with detached, semi-detached, and terraced houses doing even better, seeing almost a 30% jump. The average house price now sits at £288,000.

So, why are flats lagging behind?

Experts point to several factors:

• Working from home: The rise of flexible working means people are craving more space, making houses with gardens more appealing.
• Cladding concerns: The Grenfell Tower tragedy highlighted the dangers of unsafe cladding, making buyers wary of flats, particularly older buildings.
• Landlord sell-offs: Rising taxes and mortgage costs have led some landlords to sell up, increasing the supply of flats on the market.

London Flats Hit Hardest

The capital, where over half the population lives in flats, has seen the biggest impact. Flat prices in London have barely budged since 2019, making it the worst-performing region in England and Wales.

Experts blame this on:

• Brexit uncertainty: The impact of Brexit on London’s businesses has made investors hesitant.
• Tax changes: Higher taxes for buy-to-let investors and overseas buyers have dampened demand.
• Affordability: Soaring living costs have pushed some people out of London altogether.

Is there light at the end of the tunnel?

Some experts believe that flat prices are starting to recover, particularly in London. Recent interest rate cuts could make mortgages cheaper, making flats a more attractive option for buyers.

The bottom line? While flats haven’t performed as well as houses recently, there are signs of a rebound. The future performance of the flat market will depend on factors such as interest rates, the economy, and buyer confidence.