Is buying a flat with high service charges (not London) a bad choice, bad investment?

[CatAndHisKit]

I wonder if flats ever grow in value generally, especially if they've lost their new-built shiny-ness (this one was built in early 2000s).

I'm looking to buy and so far bo lucj with houses. I've seen a great flat whicj ticks most of the boxes, but despite being a 3-storey block there is a lift. Service charge is sky-high! Building insurance included but nothing else.

I wouldn;t even mind paying that if they were to accept a lower offer, but I worry that it will never rise in value - more wear, high charges. It is a good location within the town but it's the town itself is still around national average for property prices, no higher.

The sq footage is actually bigger than some 2-3 bed terraces I looked at in several locations. Its an upmarket sort of block, well loked after.

I know flats are unpopular atm anyway, so the vendors might accept a low offer, but is it a bad idea overall?

I've only ever purchased a flat once and unless I had no other choice, I wouldn't again. There's too much agg (IMO) and high service charges but not a lot of return on your investment are one of them.

When some work did need doing to the exterior of our flat, getting it done was like getting blood from a stone. It took constant chasing- they're happy to take the money, but not always happy to spend it. I'm sure this isn't universally the case, but it's not uncommon either.

If you can afford a house, personally, i'd go for a house every time.

Oh and to add to the value concerns, it's not necessarily always the case. We only lived in our flat for a year, purchased for £110k and sold for £120k 13 months after purchase.

What do you mean by sky high? Even if living in a house you need to set money aside for repairs and maintenance but in blocks that’s all included.

You need to weigh it against how nice the areas are. Eg near me you can get a large apartment in a nicer road for less than a house with a smaller sq footage on a less nice road. I’d find the flat v tempting even though I’m a ‘house over flat’ person.

I would be put off from buying this flat, but wouldn't be put off my SC in general.

Unless I needed one, I would avoid buying a flat with a lift. They are very expensive to maintain. Not worth it at all. Always needing servicing, and people just don't care and don't treat them well.

I would also be concerned that only insurance is included in SC. Why isn't communal cleaning / electricity / window cleaning included? Doesn't sound right to me.

With flats in general, I have just sold mine and will never ever buy anything leasehold again. For me, it's not just about the service charge, but it's about regulations changing and never being a full master of your destiny. Property companies are entitled to put SC up every year, if they want to do work, you must comply (not necessarily a bad thing as you know they will always do necessary work before it gets bad) and regulations are changing constantly. Eg the new cladding / mortgage / insurance problem (@CatAndHisKit do check if your Flat is having this issue)

Flats do rise in value, but is it a 1 bed? I'd be careful of one beds - they're not selling / selling cheap because since lockdown people have realised how much they need space (working from home eg).

I know that for a lot of us we only had flats in our reach, and if you can get on the ladder with a flat I would, but I would research and scrutinise the hell out of the property company.

I'd avoid this one OP, unless you actually need a lift of course.

I'd say in London, generally, this is fine. I/we have had a couple of flats (share of the freehold and long leasehold) where value has increased considerably over time. We currently live in the sort of large London flat you are describing ... But it's very well managed with service charges, a responsive management company and a healthy reserve fund. No private garden but a large (and lovely) communal one.

I don't know about outside London as it's less certain I guess. Probably worth an offer as it sounds nice? Location, location, location as they say.

hmm sounds like it's best to avoid. It just seems like an easy solution wha with mad competition regarding houses at the moment, and me being quite fussy re houses (size of rooms, location). The flat has enough space (a large two bed, two baths) and a good location - but yes, of course there is a reason whyit's the houses that people fight over!
JoJo it's the lift that I don't need that makes it awaste of money. It's over 1500 a year! When I lived in London, my prime area flat had this as service charge but then rose to 3K - I know this one won't go up that much but it's still too much. I'm in a house now ad don't spend this muhc yearly on maintenance. It did happen one year but def not yearly.
*RedRosie( yes it's a different thing in London - I used to live in a short lease flat there and sold with a profit after 7yrs! But it was prime area. Also bought in Bristol and made profit after two years just because te prices have started to rise there just then.
Looking at the sold prices in this block all flats gone down in value since being new built in 2000, then there was a rise in around 2012 but then down again.

kitten no the cleaning and maintenance is included, but no internal bills of any kind (I had water included in another flat in the past), some blocks have communal heating. Cladding is not an issue for ne when buying as don't need a mortgage, and I hopethat by the time I want to sell, they will do somehting about legidlation (no cladding there ayway, it's brick, no balconies, but you never know re mortgages) - so potentially issues wilth selling on.

I think though it's tempting, I'll keep looking for a house, but will have it on backburner for a couple of weeks as I doubt it will fly off the market.

Ah meant to say that the management co is made up of the residents so that's another plus point. It's still not your own decision regarding any issues, of course.

£1500 is cheap for a block with a lift!
If you can get a house then I think that's a better bet but if not I wouldn't consider that a high charge.

dairy, it's over 1500 (quite a bit) - but the point is it's a low rise block so lift is not a neccesity at all but a luxury (useful when with luggage) - similar block without lift has 700 as a yearly charge (again we are not talking London and these aer upmarket blocks) which I'd be much happier with.
It's more about the whole value issue - I'll be putting in over 1500 per year (I jut say 1500 as I factor in insurance which i'd pay anyway, though still contents insurance to pay) and then it will be falling in price gradually over years (or even extra charge if things deteriorate in the building). I think these blocks are great if you happen to have a lot of spare cash (as this is on top of the usual household bills) or retired and don't vare if it goes down in value a bit as no intention of selling / good pension.

*necessity

Unless there are no alternative better more vivable

Unless there are no alternative better more vivable options as you seem to have answered your own questions and concerns.

Go back to basics - if it is overpriced (service charge) and not in keeping with the street, neighbourhood and locality then prospective buyers (and mortgage lenders) will ask the same questions and concerns. So unless the seller is willing to take a massive price drop I doubt it is that good a purchase proposition.

I am in luxury prime central London and accustomed to sky high rip off service charges but I supposed there are some incidental tangible benefits. Given the choice I rather pay for more space than 24 7 356 concierge, private security, shared residents leisure facilities club house etc etc. Although your service charge sounds extraordinary high in your locality but in core central London new builds I would gladly pay that "bargain" price for ongoing costs of ownership.

New build flats don't tend to increase in value for a long t8me round here and some have just sold for 2007 purchase price. Service charges will likely increase year o year too. Lots of blocks of new build flats can be left half empty too which is a wired feeling to live in. After my experience I wouldn't wamy anyone else to make my mistakes

1500 is just a standard service charge. I’d be wary of 700 and that sounds low nas like you might be asked to suddenly fork out thousands if the roof needs repairing etc.

If you’re unsure, just stick to a house.

Jo it's a couple of hundered over 1500, I just deducted the insurance contribution, but as I say if I used the lift it would make it worth it, otherwise not really bearing in mind the flat will not go up in price (or at least it hasn't so far in 20yrs!) - if I knew it was growing in value, I wouldn;t mind forking out on charges so much. Also it's a modern building with about 10 flats so they do overpay for the still new-ish building and tere is a fund.
The other worry if the charge will increase as this is an absolute max i'd want to pay. London is different if you didn't buy on the peak, as there is always price growth for nice flats in good areas.

The other one has no lift and is a smaller block and in good condition. I just don't like that flat as much (no gas, outlook not as good).

MyTabby what did you do in the end, I wonder - sold with a loss or did it mean you were stuck and couldn;t move?

Resipsa yes that would be quite low for prime Central london and flats will keep/grow in value. But my previous flat in london rose from 1500 to 3K in charges (VIctorian conversion but prime location) whereas I think in modern blocks the charges are more stanble. I'd def not want to pay for leisure facilities, or a concierge. I'd actively dislike being 'observed' when coming and going every time by a concierge haha. We had a live in caretaker in the block, but not 'receprtion' at the entrance.

If the fact that you’re contribute to the lift that you wouldn’t use is such a bother, just stick to houses and don’t even view flats.

Just make sure you follow the basic golden rules for any new property acquisition - how sellable and what is the potential onwards resale market. Make sure you scrutinise the property basic legals such lease remaining duration, any unreasonable restrictive covenants etc and preferably a property that is not too off market ie silly rip off service charges which only goes up and also dependent on both physical property condition and whether all units are occupied or empty etc. Probably avoid any properties which require specialist lending or only open to cash investors as the market now is potentially too unstable given Covid pandemic economic depression and no deals WTO cliff edge Brexit. Ideally we all want to buy into a hot forever in demand sought after value appreciating locality with the right Covid WFH desirable room and private open space flexibility with pricing appropriate to supply, demand and social political economic landscape. This pandemic will probably last another two years with potentially much longer term social economic impacts. Brexit will be initially short to medium term pain but eventually hopefully there may even be some tangible long term benefits if we can get any decent international trading arrangements other than default WTO terms. Good luck!

We have had 3 flats now and never again.
It seems to be either a large block where the freeholder has to take
control as otherwise the leaseholders would never agree on anything.
Or a smaller self-managed one where you can be ripped off by the
other leaseholders or bullied as we were.
Basically no one wants to shell out for the work as it is not
"their" flat .
The leasehold Advisory service are good people to contact who will
give you details of your rights and obligations in flats.
Before you even make an offer you must find out how long
there is left on the lease and it may not be mortgagable
or the renewal can cost thousands

Jo I'd say it would bother many buyers if a similar flat without a lift (also 3 storey building) has half the amount of service charges. I would consider a flat if SC were below a 1000 - shame that other flat had other issues (internally). I generally do view houses but this was just a particularly good flat - but possibly it's the head that should rule.

Thank you, Res - I@m mostly concerned that it can go down in value further. No crystal ball of course, so I don't know when will I be selling again but not planning to for at least 5 yrs). I@m especially cautious as I'm selling my current house for exactly the same as I bought it and had spent quite a bit on maintenance) so it probably is mad to go for something else uncertain, I just jave a soft spopt fot hat area and for large top floor flats - if only I knew that afetr a while these will become easily saleable.

Justpass yes of course the lease is the main point - I did ask that first thing, it's very long (close to a 1000yrs). It's the residents management co but as you say, the majority would win in any discussions, and it could be unpleasant if anyone was bullying as in your case.
Ok I'm just praying a house will turn up next week (gone a bit quiet in the last week here).

We are not in London and we pay £110 a month service charge. No lift in that either but we have a healthy reserve fund. Its a small group of flats in a converted house.

£700 sounds way to cheap to me. £1500 with a lift also sounds very cheap and would worry about bigger bills.

rambling I mentioned earlier that it's over 1500 - actually 1700 but I've sort of deducted the insurance cost that would be paid on a small house anyway (without contents).
In amy case the bigger bills may always happen too. Has your charge remained stable over the years?

You state that the service charge is high because of the lift. It probably isn't that. More likely there is a sinking fund to cover any future unexpected maintenance costs. I'd be much more wary of a low service charge tbh. Having been in both situations and had to fund £10k with sort notice I would only ever consider a block of flats with a sinking fund as I am in now.

My service charge has remained stable for 5 years. Am expecting an increase in January.