Buyers of new apartments are paying over the odds in service changes
A recent survey carried out by insurer Direct Line showed that buyers of apartments coming onto the market this year are paying significantly more in service charges than those buying older properties.
Luxury additions such as gyms and cinema rooms are all adding to servicing costs.
A service charge tends to vary from year to year and is paid by the leaseholder to cover maintenance of the building.
The survey suggests that leaseholders of newly-built properties are paying a lot more in these charges than the general average of £1,863.
Some of the worst charges are found in new apartment blocks lining the River Thames in London, where residents will have to pay nearly £7,000 a year on a two-bed flat.
Nick Breton, head of Direct Line for Business said: “Service charges are often a hidden cost, which should be factored in when considering the affordability of a property.
“In some cases service charges are uncapped and can escalate rapidly. Landlords need to take into account all associated costs when purchasing a property, such as service charges, ground rent and taxes.”
The service charge and ground rent together mean that a 40% taxpayer purchasing a flat to rent out has to earn £5,200 a year just to maintain the property. The mortgage, council tax and insurances all come on top.
The research also suggested that some developers are requiring freeholders to pay fees for the upkeep of private roads or communal gardens in private estates.
Direct Line said: “One new-build development coming on to the market in Croydon in 2016 will see homeowners paying £1.55 per square foot in service charges, while a development in Lambeth coming on to the market in 2017 is charging four and a half times more, at £7 per square foot”.
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