Two in 5 new-build flats now promote at a loss: What has gone improper?

Flat owners up and down the country are finding the value of their home has fallen below what they paid for it.

That is especially true if they bought their flat as a new build, in which case they are now six times more likely to sell at a loss than those who own comparable houses.

Almost four in 10 flat sellers in England and Wales got less than they paid in 2025. That is according to Hamptons’ analysis of Land Registry data, which excluded those who had owned their flat for more than 20 years.

That rises to almost two thirds of flat owners in the North East, and close to half of flat owners in Yorkshire and the Humber. In London, more than 40 per cent sold at a loss.  

In contrast, only 6.3 per cent of sellers selling ex-new build houses across England and Wales sold at a loss last year.

Among older homes, just under 20 per cent of flats sold at loss last year, compared to 5.1 per cent of houses. 

Again, buyers in the North East were most likely to sell at a loss with more than 26 per cent doing so.  

The problem can’t be explained by owners selling up and moving every two or three years, before the property has the chance to rise in value. 

Hamptons says the average flat seller who made a loss had owned their home for almost nine years, compared to 12.5 years for someone who didn’t.

Why are flats selling for losses?

It is no secret that new-builds are often sold at a premium to similar homes on the second hand market.

‘They trade at a premium like new cars,’ says buying agent Henry Pryor. ‘They are worth less the first morning you wake up in it and too many of them are poorly-built.’

The Help to Buy scheme between 2013 and 2021 drove demand for new build flats and pushed prices higher over a sustained period.

The scheme helped more than 375,000 people onto the housing ladder, most of them buying new build flats. 

It enabled first-time buyers to buy a new build with a 5 per cent deposit with the government lending between 5 and 40 per cent of the cost of a new-build home as an ‘equity loan’. The loan itself was interest free for the first five years.

‘Around 40 per cent of flats were sold using the scheme at its peak,’ says David Fell, lead analyst at Hamptons.

‘Owners of these flats are now selling them to buyers who don’t have the benefit of a 20 to 40 per cent interest-free loan, and at much higher mortgage rates too.’ 

The life stage of the average home buyers has also changed, and this might be dampening the price of flats, too.  

‘One or two bedroom flats used to be the norm for getting on the ladder,’ says buying agent Jonathan Hopper. ‘But homeownership trends have changed, and lots of first-time buyers are getting on the ladder later in life and opting to go straight from renting into houses,’ he says.

There is a growing trend among first-time buyers towards buying a ‘forever home’ or somewhere they will stay for many years, according to Santander.

It revealed that two thirds of its first-time buyer mortgage customers purchased a house in 2025, rather than a flat.

Richard Donnell, executive director at Zoopla says that first-time buyers are much more wary of buying a home as a short-term stop-gap.

‘Home buyers are prioritising space and have been since the pandemic,’ he says. ‘They plan to live in homes for longer in the face of longer mortgage terms and higher buying costs from stamp duty. 

‘It’s why most first time buyers want a three-bed house that they can “do up” and add value to over time. 

Toxic leasehold 

Perhaps the biggest issue is that flats are usually owned leasehold – a label which has become increasingly undesirable in recent years.

New-build and older flats are both likely to be leasehold, though some older apartments in house conversions have now changed the ownership structure to give each flat owner a share of the freehold.

Leasehold flats often come with some off putting factors. For a start, many come with ground rents which can double every 10 or 20 years or rise in line with RPI inflation.

Last week, the Government announced a £250 cap on ground rents as part of the draft Commonhold and Leasehold Reform Bill, but it is not likely to become law until at least 2028.

There are fears the cap may encourage some freeholders to recoup costs from elsewhere, such as through service charges.

Service charges increased by an average of 41 per cent between 2019 and 2024, according to The Property Institute, and the average leaseholder is now paying £3,634 per year. 

This is also putting off buyers, who are reluctant to commit to extra costs they have little or no control over.

In London, there are postcodes where the average service charges range between £10,000 and £20,000 a year and there are examples up and down the country of annual bills reaching as high as 2 or 3 per cent of the home’s value.

‘The leasehold tag has become so toxic that I know of law firms that are not even touching it,’ says Hopper.

‘Buyers are having to ask themselves whether first they can get a mortgage on it, but also whether they’ll be able to sell it in the future.’

Ashely Osborne, founder of Lexit, a service that helps analyse buy-to-let deals for investors says he is working with a lot of landlords who are struggling to sell.

‘The issue for most apartment owners is their service charges make their properties unattractive, not only to other investors but also to a would-be owner occupier,’ says Osborne.

‘Most people simply cannot afford to cover their mortgage as well as an ever-increasing service charge.’

He thinks this is a particular problem in areas where property prices are cheaper, because the service charge is higher in relation to the home’s value. 

‘Perhaps the ‘elephant in the room’ are northern markets, where the situation could become significantly worse,’ he says. 

‘Whilst the capital costs to purchase apartments are obviously less, there is also significantly less margin for error.’

Were someone to buy a £150,000 apartment with a £1,500 annual service charge, that represents 1 per cent of their property value.

If the flat does not increase in value, but the service charge doubles, then that becomes 2 per cent of the property’s value, which will be off-putting both to home buyers and investors.

Cladding casts a shadow 

Rob Dix, co-founder of landlord platform Property Hub believes the impact of the cladding scandal following the Grenfell Tower tragedy cannot be underestimated.

‘If you go to the Land Registry and look at the prices of houses versus flats, the growth rate has always been similar,’ says Dix.

‘But that’s disconnected in recent years, with flats being held back by cladding issues – plus changing preferences for a few years in the wake of covid. 

‘Even blocks without cladding issues have been affected, because it’s made mortgages hard to secure while you wait for certificates. 

‘This will resolve itself, but anyone selling a flat will have seen the market for flats suppressed by these issues.’

While the losses have spiked recently, flat owners, particularly those selling ex-new builds, have been incurring losses above the norm for the past decade, according to Hamptons’ data.

For example, in 2016, just over a quarter of flat owners selling ex-new builds sold for a loss. That compares to 10.1 per cent across the wider market for both houses and flats.

Meanwhile, in 2021 during the pandemic induced boom, 31.3 per cent of ex-new builds sold at a loss compared to just 6.5 per cent across the wider market.

Rob Dix suggests this is largely a hangover from the property price boom in the run up to 2008, which saw flat prices shoot up to unsustainable levels. 

‘If you look at cities like Leeds and Newcastle you can still pick up city centre flats below their peak 2007 price – which is mad,’ says Dix. 

‘New build flats were being sold at elevated prices, aided by the fact that anyone with a pulse could get a mortgage. 

‘So even nearly 20 years on, anyone selling could be taking a nominal loss.’

Can flats still be a good investment?

Flats have always been cheaper than houses, but the price gap has widened over the past decade.

In October 2015, the average price of a flat was £166,100, according to Zoopla, compared to roughly £222,400 for a house – a gap of £56,300 on average.

A decade later, and the average price of a flat is £191,300 compared to £323,700 for the average house. The gap has increased to £132,400.

This means that the difference between the typical house and flat has gone from 29 per cent in 2015 to 51.5 per cent in 2025.

Some of those working in the property industry think the situation could get worse before it improves.

However, there are plenty who still view flats as opportunities to bag a bargain, rather than red flags. 

Rob Dix of Property Hub says that while the last decade has been hard on flat owners, it does not mean that flats going forward will be a bad investment.

‘Circumstances have been uniquely bad for flats for the last five to 10 years so they just haven’t had the growth, and new build flats, in particular, are easier to overpay for,’ says Dix.

‘The interesting thing to watch is whether the gap that’s opened up between relative house and flat prices over that time reverts to [the average] or stays as it is. I suspect the former, but we’ll have to wait and see.’

Richard Donnell somewhat agrees. He says: ‘Flats are becoming better value for money and at some point this value will be recognised and appreciated, a recognition that may come soon, within the next one to two years.’

As for buying a new build, the key is to do careful research. This includes looking in the right location, researching how realistically the developer has priced the homes in the first place, digging into the developer’s financials and never being afraid to negotiate hard over price.

‘There’s nothing intrinsically wrong with new build flats,’ says Dix. ‘Do your research and know what you should be paying.’