If you see a construction site in London, the chances are it’s for some luxury flats which you probably can’t afford. In fact it sometimes seems they are the only thing being built in the capital right now.
But while people may moan about how overpriced London property is, one thing we often completely forget about is the service charge.
New research by Direct Line Business shows that the average annual fee for new-builds in London has soared to £2,777 ($3,952) — more than 10% of the average UK salary.
The addition of gyms and even cinemas — anything to keep residents from leaving their own building — are said to have been the main drive behind increasing service charges.
“Ground rent fees” — seemingly random charges which leaseholders are forced to pay without knowing what they’re actually for — also came in for criticism. The average ground rent for London new builds is £327 ($465), which is paid on top of the service charge.
The report from Direct Line Business notes a new trend developing where even freeholders are being hit with service charges:
Here’s an extract from the report: “In one example owners of every four-bedroom property situated on a development in Guildford are charged £900 ($1,281) a year for upkeep of the road and communal gardens.”
Nick Breton, head of Direct Line for Business, said buyers often forget about service charges altogether, calling them a hidden cost “which should be factored in when considering the affordability of a property. In some cases service charges are uncapped and can escalate rapidly.”
The message is clear — if you’re buying a new flat, budget for an outrageous service charge.