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You are here: Home / Latest News / Leasehold houses have been sold for more than freehold ones, reports Telegraph

Leasehold houses have been sold for more than freehold ones, reports Telegraph

November 10, 2017 //  by Sebastian O'Kelly

The Daily Telegraph today reports data that shows that prices for new leasehold houses have risen faster than those for new build freehold ones.

The average leasehold house currently costs £256,100, a 4.3pc rise on 2016, while freehold house prices have only risen 2pc to £306,550, it claims.

LKP research shows that (initial) prices for leasehold houses have risen, as developers have increasingly adopted this form of tenure in order to create an investment asset class – the freehold and its income – at the expense of their own customers.

It is tragic that we taxpayers have poured money into the Help To Buy scheme to encourage first-time homeownership and in fact fuelled housebuilders’ profits and investments for ground rent speculators.

Communities secretary Sajid Javid has been aware of this since last year. He needs to stop it now.

Developers inflate house prices ahead of leasehold crackdown

Housebuilders appear to be cynically increasing the price of leasehold houses in advance of a Government crackdown. Land Registry figures show the average cost of a new leasehold house is increasing at a faster rate than comparable freehold properties. The average leasehold house currently costs £256,100, a 4.3pc rise on 2016, while freehold house prices have only risen 2pc to £306,550.

Developers repeatedly say in evidence to government that they need the continuance of leasehold as the sale of the freeholds underpins the viability of some development projects.

Retirement housebuilders McCarthy and Stone and Churchill make this argument and both introduce ground rents way in excess of the Nationwide’s 0.1 per cent of capital value, above which it will not issue mortgages.

Our research debunks the developers’ argument about site viability. In fact, they selling leasehold properties for whatever they can get away with.

And owing to the housing crisis they are getting away with a lot: their shoddy leasehold products are selling for increasing prices at initial sale.

However, after the initial sale it is a very different story.

Some 100,000 leasehold houses and flats are blighted owing to onerous lease terms according to Nationwide, which won’t lend on them. Nor will other increasingly alarmed lenders.

The Leasehold Knowledge Partnership undertook two detailed pieces of work adopted by the All Party Parliamentary Group on Leasehold and Commonhold Reform.

1/ That leasehold houses are often being sold at a premium.

Figure 2 here shows that there is now often a premium rather than a discount for new leasehold house sales in areas where developers have been able to impose this form of tenure

https://www.leaseholdknowledge.com/wp-content/uploads/2017/04/AllPartyParliamentaryGroupLeaseholdReportApril27.pdf

2) The data on the growth of the leasehold house sales appears in our report here:

Last year: £64.8bn leasehold properties sold. £13.7bn was new-build. Leasehold house numbers double. Developers make £300-500 million a year from ground rent sales

It shows the rapid growth in number in recent years

We also outline in the article that the developers are earning £300 – £500 million a year from freehold sales on leasehold homes and we suggest this is the real reason why developers have returned to selling houses with this form of tenure.

(Note the £300-£500 million extra profit generated by the developers from selling freeholds to investors also includes the sale of freeholds on new build flats as well as houses)

It is utterly dishonest – but sadly no surprise – that developers and the sycophantic professionals who pander to them claim that selling leasehold somehow allows them to keep costs down and build more homes.

Here’s why housebuilder shares are down today

It was a bad morning for housebuilders, with companies listed on both the FTSE 100 and FTSE 250 dragging the indices lower. Persimmon, the UK’s largest housebuilder by volume, led the fallers on the FTSE 100, with shares dropping 3.4 per cent to 2,772.5p, while Barratt, Taylor Wimpey and Berkeley Group were all among the biggest fallers.

Related posts:

Surge in new-build leasehold houses with £1.9 billion sold last year Daily Telegraph reports the new-build leasehold houses ban Persimmon sleazePersimmon sold leasehold houses for £50,000 more than same-size freehold houses at Harrow View West Telegraph reports case of Taylor Wimpey pensioner who has paid £38,000 for his freehold … and now won’t help him Press reports how freehold doubled in price to £15,900 after being sold to Landmark Investments

Category: Latest News, News, PressTag: Help To Buy, The Daily Telegraph

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Reader Interactions

Comments

  1. David McArthur

    November 10, 2017 at 12:04 pm

    “The average leasehold house currently costs £256,100, a 4.3pc rise on 2016, while freehold house prices have only risen 2pc to £306,550”.
    Can it be said that these leasehold and freehold houses are like for like? I certainly hope not – long held belief of mine is that leasehold sales of houses are not discounted, LKP have, with some authority, confirmed this.
    I think I am right in saying that the DT have run a number of stories on leasehold, all of them on the right side, our side. Astonishing for the DT to be against untrammelled laissez faire capitalism, I will cancel my subscription to the Beano, and subscribe to the DT tomorrow first thing.

    • admin

      November 10, 2017 at 12:35 pm

      Well, steady on: not much coverage (any?) of tax dodging reporting the BBC Panorama Paradise Island report.

      Or in Mail, or Murdoch press. Why is this?

  2. Paddy

    November 10, 2017 at 12:23 pm

    The trough is deep and slimey.

    Sadly too many in Parliament have snouts and trotters.

    It’s not as if they can run the country competently by way of compensation.

    I blame politics myself.

  3. Michael Epstein

    November 11, 2017 at 5:58 am

    It should be noted that it is very rare (if ever)that a mortgage is ever taken out for a McCarthy & Stone or Churchill Retirement apartment. This is because the vast majority of customers are downsizing and so are asset rich cash buyers.

    So the rules applicable to mortgage requirements are not applicable.

    However, there is a very painful sting in the tail.

    Often, people plan to finance their retirement via an equity release scheme. This is proving all but impossible to do if the asset is a retirement flat, as unlike other properties the value of retirement flats falls.

    Ironically, Legal & General have investments in the retirement property sector. thus far they have declined to tell me if they would offer equity release for one of their apartments?

    • admin

      November 11, 2017 at 11:43 am

      I did not think it really needed noting, but you are right: mortgages are rare in retirement housing.

      They are not unknown, as families stump up and become indebted to acquire these assets.

      We could ask the volume builders about mortgage-related sales.

      We are not aware of any family being turned down for a mortgage, but it would not be a complete surprise if it has happened or been a bit touch-and-go. On the other hand, families usually have secure assets, the children being middle aged. So perhaps loans are secured against their houses rather than the flat.

      Either way, ground rents in retirement housing are unaccountably high. They are high to create an income in the freehold to be flogged off to ground rent speculators.

  4. ollie

    November 11, 2017 at 1:27 pm

    Most persons have to be atleast 60 years old to qualify living in a retirement block and most mortgage lenders want borrowers to fully pay back their mortgage loan by time they reach 65 years old ,

    Its virtually impossible to get a mortgage starting at 60 years and to fully pay off loan at 65 years.. So most buyers in retirement homes are those with larger house without mortgage and want to downsize to a brand new smaller property. So for most are cash buyers and its their last property purchase.

    • ollie

      November 11, 2017 at 1:38 pm

      You might say its the pension aged buyers – last hurrah and a financial hair cut in retirement. .

      But the developers take advantage to get higher price from pensioners in part exchange transactions . The developer also take advantage to mark up the lease with clips such as higher service charges, transfer fees after sale of flat by executors of estates , and higher fees for subletting consent

      • Ian Martin

        November 15, 2017 at 10:12 pm

        Most leases in these retirement homes prohibit sub letting.

  5. June Hamilton

    November 13, 2017 at 8:33 pm

    I have read all this with great interest and having made a research study on proposed local inappropriate, overwhelming and unsustainable developments in the western part of Arun District Council, I am greatly confused by the continuing planning applications and permissions in this region, on a flood plain alongside a nature reserve, on grade 1 prime agricultural land with archeological restrictions, all of which are being ignored.. how is this possible? Are people being bribed? Or have the bribes of government policy to developers overtaken all planning regulations and resulted in the turning upside down of all local democracy??????????

  6. sussex

    November 16, 2017 at 10:12 am

    Very good Channel 4 Dispatches programme last Monday 13 November: ‘The Great Housing Scandal’. Recommended viewing if you did no already catch it.

    • sussex

      November 16, 2017 at 10:15 am

      (Correction: ‘not’ – isn’t predictive text a pain?)

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