In the last few months there has been some really interesting data from the indices on what’s been happening to demand, supply and values of flats versus houses. This is classic example of why the use of average property prices can cause unnecessary problems in the market, especially for buyers and sellers.

Two great pieces of analysis on flat prices this month are from Zoopla and Hamptons.

According to an article in the Financial Times which used Zoopla data: “The value of flats has lagged houses for 5 years, making upsizing a challenge” Source: James Pickford in the Financial Times.

The Zoopla (part of Houseful) house price index shows the change in flat and house values in the five years to 2024 by country and region. This showed that houses rose faster than flats in each geographical area.

In London, flat values were 2% higher in 2024 vs 2019, while the east of England saw better, but still stunted growth of 5%.

Personally, I think the trend of flat prices growing more slowly than houses has been happening for a lot longer than five years. The key change to affordability – which can influence prices – was when the government changed the mortgage market for First Time Buyers (FTBs), who often get on the ladder via a flat, especially in the South and more expensive areas.

Restricting FTBs to repayment mortgages and changing their affordability calculations to include a long term rate ‘buffer’ at 6-7% rather than the 1-2% rates which could be achieved, has put a ‘cap’ on what FTBs can afford – reducing what they are able to offer.

We saw this influence accelerate during the recession – with flats hardly increasing in prices, while houses, which were being bought with cash or a mix of cash and lower Loan to Values rocketed.

Over the past three years, flat sales have run 25%-33% lower.”

Hamptons have looked at the data from a different angle, focusing on the proportion of flat owners seeing their flat value go into reverse. “Over the past three years, flat sales have run 25%-33% lower than they otherwise would have if every seller could sell their home for more than what they originally paid. The reluctance among flat sellers to crystalise a loss, together with the higher cost gap between house and flat values since Covid, has emerged as the primary factor contributing to depressed sales volumes. Cladding and leasehold issues, whilst generally improving, have also played a role.”

According to their analysis, this has quite an impact on the number of home movers and they estimate that “around 400,000 fewer flat owners in England & Wales will have moved home compared to a scenario where the value of their property continued to rise.”

The upside of flat values not rising as much as house price growth

With the current market in most areas looking as if it’s stabilised and, in some locations, becoming quite busy, for buyers who have held off due to higher mortgage rates over the last 18 months, there are some super opportunities to buy into the market at a much better value than they are expecting.

Zoopla suggest that: “Older flats in good condition where the residents manage their own homes is a good place to start. More leasehold and running cost data on property listings on areas including services charges and ground rents will help buyers make better informed decisions.”

Both experts point to the changes to the way flats are owned which may present a further upside in owning a leasehold property.

Values of flats in your area

Not all flats will have seen restricted price – or rent – increases, so it’s always worth having a look at your local market to see if flats in your area outperform the data from Zoopla and Hamptons. If it does, it’s a great story for the media as they love hearing about statistics that show the local market is different to the national averages.

And, if flats are great value, it’s well worth shouting about it to attract people buying into the market.

For more information about the performance of flat and house prices, check out their reports here:

Report 1

Report 2