Price Gap Between Leasehold and Freehold Property is Now at an 8-Year High

Why Freehold Property Costs More than Leasehold Property
Rotherfield Garth in Henley on Thames by Spitfire Homes.

Research by letting and estate agent, Benham and Reeves, has found that the price premium being paid for a freehold property by homebuyers in England and Wales is at its highest since 2011.

Using property transaction data, Benham and Reeves found that the price gap between a leasehold and freehold property was 14.3% in 2011, dropping consistently year on year to just 5% in 2014.

It then increased to 6.9% in 2015 and stayed at around this level before increasing last year in the wake of the leasehold scandal. So far in 2019, the gap has widened from 8.3% in 2018 to a notable 12.3% this year.

Historically, freehold has always been more preferential than leasehold. With freehold, the buyer becomes the owner of the property and the land. Also, ground rent and service charges do not factor, and conveyancing costs are lower.

If we go back just one over a year, there was the leasehold scandal. It was considered a scandal as homes had increasing ground rents with some new homeowners paying massive amounts for ground rent in future years. It resulted in homebuyers paying even more for freehold property to avoid such a situation.

The most significant freehold price gaps are in London high-end market, with Camden home to the highest with a 227% increase!

In Kensington and Chelsea, the average price paid for a freehold property is £4.4m, 190% higher than the average price paid for a leasehold (£1.5m).

Homebuyers in Elmbridge are paying 159% more for a freehold, the highest outside of London, followed by the City of Westminster, Islington and Hammersmith and Fulham.

London is where you’ll find the majority of the most significant price gaps. Chiltern has the most substantial freehold price premium outside of the capital at 105%. South Bucks is also very prominent in the rankings with a 92% freehold property premium.

Despite last year’s revelations, there are still two areas where homebuyers are paying more for leasehold homes. Tameside and Sunderland are home to an average price paid for leasehold homes some 6% and 4% higher than freeholds.

Marc von Grundherr of Benham and Reeves commented: “There is no doubt that the leasehold scandal has had a severe impact on buyer sentiment and the amount people are willing to pay to avoid any of the potential nightmares that unfolded last year.

So much so that the premium paid for a freehold home has already hit it’s highest levels in nearly a decade and will no doubt continue to do so.

A freehold is always the preferable path when buying, but unfortunately, not everyone can secure themselves a foot on the freehold ladder, either due to a lack of stock or the additional financial cost.”

Price Gap Between Leasehold and Freehold Property is Now at an 8-Year High 4Price Gap Between Leasehold and Freehold Property is Now at an 8-Year High 5Price Gap Between Leasehold and Freehold Property is Now at an 8-Year High 6Smallest price gap between leasehold and freehold property

Leasehold vs Freehold property pricing by Paul Godbold

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