Value of leasehold outstrips freehold, finds research...

Despite all the controversy surrounding it in recent years, and various government attempts to address the leasehold scandal, new research from Warwick Estates has found that the total value of new-build leasehold transactions is some 50% higher than new-build freehold transactions.

This comes as flats and urban living continue to dominate England’s market.

The research found that, in the first six months of 2021, there were 1,523 new-build transactions in England. Of these, 44.8% (or 683) were freehold homes while 55.2% (or 840) were leaseholds, showcasing a fairly even split for England’s market.

That said, the slight lead that leasehold properties enjoy is very much assisted by London’s new-build market, which has witnessed only two freehold transactions from a total of 475 this year so far.

As a result, a massive 99.6% of the capital’s new-build sales have been leasehold contracts, helped by the overwhelming dominance of flats over houses in London.

The research also suggested it’s not just London where leaseholds prove to be the most popular choice, with this also being the case in the South West (63.1%) and South East (52.6%).

Leaseholds are typically cheaper and may hold particular appeal to first-time buyers as a more affordable way onto the property ladder, even in spite of the issues – which have received nationwide exposure in recent years – surrounding ground rents, service charges, complex contracts, cladding and hard to purchase leases.

When it comes to new-build homes, the affordability roles are also reversed, with leaseholds having a higher average price than freeholds. The average price of a freehold is currently £307,995, while a new-build leasehold costs 25.9% more at £415,626.

Once more, though, this stat is heavily skewed by London’s new-build market and its top-heavy dominance of leaseholds, which helps to nudge the national leasehold value up.

So much so that, if the capital is removed from the data, the average price of a new-build leasehold falls to £265,000, while the average for a freehold is 16% higher at £307,500.

Whichever way you look at the data, the overall sales value of all new-builds in England across this time period is £691 million.

Unsurprisingly, London is delivering the largest share of this with sales totalling £353 million. This is followed by the South East’s contribution of £107 million.

The research found that, due to the dominance of leaseholds, they contribute £458 million to the national total, 49.1% more than the freehold total of £233 million.

This is despite all the negative headlines surrounding leasehold over the last few years