De­vel­op­ers in­flate house prices ahead of lease­hold crackdown

The Daily Telegraph - Your Money - - FRONT PAGE - Sam Brod­beck

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 risen by only 2pc to £306,550.

Un­like flats, houses in Bri­tain are gen­er­ally pur­chased on a free­hold ba­sis. How­ever, in re­cent years de­vel­op­ers have sold in­creas­ing num­bers of houses on lease­hold terms. There are now 1.2 mil­lion lease­holder houses in Eng­land alone. Free­hold­ers set and col­lect an­nual ground rents from lease­hold­ers.

Some of Bri­tain’s largest builders have boosted prof­its by sell­ing on free­holds to third-party in­vestors hun­gry for the ris­ing in­come that ground rents pro­vide.

In some cases home­own­ers have dis­cov­ered small print that means ground rent pay­ments will dou­ble ev­ery decade. Some lenders have now said they won’t give mort­gages to peo­ple who buy prop­er­ties on these terms, which has left some own­ers strug­gling to sell their prop­er­ties.

The Gov­ern­ment ap­pears likely to an­nounce a ban on the sale of lease­hold houses fol­low­ing a con­sul­ta­tion in July this year.

Lucy Pendle­ton, founder of James Pendle­ton, an es­tate agent, said: “De­vel­op­ers have re­alised the com­mer­cial value of leases and they have be­come a ticket for prof­i­teers who are able to take ad­van­tage of buy­ers with lit­tle choice but to pro­ceed to get their foot on the lad­der,” she said.

Se­bas­tian O’Kelly, of the Lease­hold Knowl­edge Part­ner­ship, a char­ity, said its re­search also found ini­tial prices for lease­hold houses had risen.

But he said it was a “dif­fer­ent story” af­ter the sale of the homes.

“Na­tion­wide, which won’t lend on them, thinks there are 100,000 lease­hold houses and flats that are un­sellable owing to oner­ous lease terms,” he added.

Mr O’Kelly said it was “tragic” that Help to Buy had fuelled the prob­lem. Prop­er­ties bought us­ing the scheme must be new­builds. Un­der new Gov­ern­ment pro­pos­als, Help to Buy eq­uity loans will be re­stricted to new houses on “ac­cept­able terms”.

The Help to Buy scheme has fuelled de­mand for new­build homes

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