Flat owners see service charges surge 52% in five years

Apartment owners have seen annual service costs rise more than 50 percent over the past five years, according to new research.

The average increase of 51.7 per cent since 2018 means homeowners now typically pay £1,431 a year on these costs, the equivalent of £119 a month.

Much of this increase — a total of 37 percent — took place between 2018 and 2019, according to research from Hamptons.

The broker says this spike was due to the large number of fire safety measures taken in the aftermath of the Grenfell Tower disaster.

The 2017 Grenfell Tower fire in London killed 72 people and injured a further 70.

Over the past 12 months, average service costs have increased by 8 percent, broadly in line with broader inflation.

It means that tenants now pay a total of around £7.6bn in service costs each year.

The figures include all flats where service charges are paid each month, representing 5.4 million million flat owners in England and Wales.

Homes where service charges are payable, as well as the small minority of flats where no formal service charges are payable, are not included in the figures.

The data is collected at the point of sale and used to calculate what other flats in the same building pay.

Hamptons said having a service cost estimate for every condo in the county provides a way to estimate the average bill nationally.

Today, the average service charge for a one-bedroom apartment is £1,287 per annum, the same as a three-bedroom apartment in 2018.

By mid-2023, the average two-bedroom flat will pay £1,426 and the average three-bedroom flat will pay £1,876.

Service charges are typically much higher in London than anywhere else in the country.

At an average of £1,792 a year, this is 25 per cent more than the average for England and Wales.

Hamptons said while this partly reflects the higher cost of living in the capital, it mainly reflects higher densities and, in many cases, buildings with more amenities.

In London, 20 percent pay more than £4,000 a year, compared to 11 percent in England and Wales.

The smallest blocks and converted homes tend to have the lowest service costs.

In blocks of less than five apartments, the average annual service cost is £1,309.

Limited communal space or areas, in combination with residents who do a larger part of the maintenance themselves, keep the costs low.

About half of all flats in England and Wales are in blocks of 20 or more.

At an average of £2,606 a year, service costs are 99 per cent higher than in the smallest blocks.

Higher service charges here generally reflect the more complex nature of larger buildings in addition to the additional services offered in larger blocks, such as a gym, concierge and communal areas.

David Fell, of Hamptons, said: ‘In recent years tenants have brought some relief with increases in service charges that follow inflation.

“The big increase in service charges came nearly five years ago and was entirely a product of historical fire safety issues in larger blocks.

“The higher bills were spent on costly short-term fixes, such as wakeful watches, or mid-term structural remedies that were beyond the reach of government or developer funds.

“But in most cases these hefty increases should now be behind tenants.”

He added: ‘More recently, leasehold premiums have shot up due to the increased cost of building materials and insurance.

However, energy-intensive building products and anything with a microchip still show double-digit value appreciation.

“While recent reductions in the cost of some building materials and energy costs should translate into lower costs for residents, this will not happen overnight.

“Commercial contracts for municipal utilities are exempt from the price cap, with many owners signing firm commercial contracts at higher prices, meaning some tenants will have to wait to see the benefit of falling prices.”