Houses Vs Flats 7 Things You Need To Know Before Buying

Introduction

Gemma:
Welcome back to Let’s Talk Money and Mortgages. Many buyers ask: “Is a flat better than a house?” For those on a budget, flats may be the only option. For investors, they can be attractive as they’re often cheaper to buy.
Today, we’re highlighting the seven points to be aware of when purchasing a flat. Joining us is Iftaka (“Ifthi”), a trained accountant, mortgage broker, and one of the founding directors at WIS.

1. Who is the flat for?

Gemma: Who is the flat for?
Ifthi:
It depends on the end user.
For families with children or pets, a house may be better because flats often lack private gardens (communal spaces must be shared).
For investors, flats can work well due to lower maintenance and lower purchase costs.
Be clear on your objective: flats can be cheaper, but they may not tick all your boxes.

2. Are flats leasehold?

Gemma: Flats are usually leasehold, right?
Ifthi:
Yes. In England and Wales, flats are typically leasehold.
With a house, you buy both the land and the building. With a flat, you buy the lease (e.g., 125 or 150 years) but not the land.
A landlord owns the land.
As leases shorten, they cause issues. Lenders prefer at least 75 years remaining. Shorter leases make getting a mortgage more difficult.

3. What about hidden costs?

Gemma: What hidden costs should buyers watch for?
Ifthi:
Leaseholders contribute to maintenance costs for communal areas (gardens, hallways, etc.).
These costs can rise annually (often with inflation) or increase sharply after periodic reviews.
You’ll also pay ground rent, which may increase over time.
Many buyers compare flat prices with houses and see them as cheaper, but they forget about ongoing hidden costs.

4. What are major work costs?

Gemma: Can there be extra big costs beyond maintenance?
Ifthi:
Yes. For example, after the Grenfell Tower fire, new regulations required costly safety upgrades (e.g., cladding removal).
Maintenance fees didn’t cover these, so leaseholders had to pay extra major works bills.
Example: £100,000 project divided among 20 flats = £5,000 each.
Other big-ticket repairs (roof, painting, etc.) can also come up.
Always keep a provision for major work costs.

5. Do leases restrict what you can do?

Gemma: Can leases stop you from using the flat how you want?
Ifthi:
Yes. Lease agreements often contain restrictions.
Examples:
No Airbnb or serviced accommodation in many cases.
Some leases ban subletting.
Always read the lease carefully before buying to avoid surprises.

6. Do flats appreciate less than houses?

Gemma: Do flats appreciate less than houses in value?
Ifthi:
In the 1990s, flats appreciated strongly. Now, growth is generally slower compared to houses.
Flats appeal mostly to:
First-time buyers using them as stepping stones to houses
Investors (who tend to negotiate hard on prices)
This can limit appreciation.
Exceptions: luxury penthouses or flats in premium locations.

7. Are lease extensions costly?

Gemma: What about extending a lease—can that be expensive?
Ifthi:
Yes. Lease extensions can be very costly.
Banks prefer leases with 75+ years remaining. If it drops below, you may need to extend.
Example: A flat priced at £800,000 in South Kensington had only 8 years left. Extending the lease cost £1.2 million.
Best practice:
Check lease extension costs before buying.
Ask the current owner to extend the lease before purchase (otherwise, you may need to wait 2 years as the new owner).

Are there issues with houses too?

Gemma: We’ve talked a lot about flats. Are there issues buyers should know about with houses?
Ifthi:
Yes, houses aren’t without problems:
New-build houses sometimes have estate maintenance fees, which can increase after review periods.
Maintenance is your sole responsibility (boiler, roof, etc.), so unexpected large bills can occur.
In rare cases, some houses are also leasehold, so always check.

Final Thoughts

Gemma:
Thanks, Ifthi, that’s some excellent advice.
Reminder:
These points may not apply to everyone. Always check with an advisor before making decisions.
If you don’t have an advisor, our WIS team is happy to help.
A mortgage is secured against your home or property and may be repossessed if you do not keep up repayments.