London Flats Lose Value Ahead of Leasehold Reform

The average London flat has fallen to £431,000, down 4.7% in a year. The longer-term record is more striking: on the revised Land Registry series cited by Bloomberg, the typical flat is worth about £2,000 less than it was a decade ago, while London houses have risen substantially. High mortgage costs and service charges are already weighing on the market, and Britain’s planned shift from leasehold to commonhold is adding another consideration for buyers of millions of existing apartments.

London flats are dragging on the capital’s housing market

London was the only English region to record an annual fall in average house prices in June 2026. Values declined 2.5% to about £554,000, despite a 1% monthly increase. Flats and maisonettes were by far the weakest property type, falling from £452,000 to £431,000 in a year, a decline of 4.7%. Detached homes slipped 0.7%, terraced properties fell 0.3% and semi-detached homes gained 0.6%. June marked the tenth consecutive month of annual price declines in London, driven primarily by weakness in Inner London, according to the latest HM Land Registry house-price data.

The decade-long performance is even weaker. Bloomberg Opinion notes that the average London flat, now worth around £431,000, is about £2,000 cheaper than in June 2016 on the revised official series. Had flat values merely kept pace with inflation, the average would be roughly £180,000 higher. London house values, meanwhile, have risen by about a fifth over the same period. The comparison suggests the problem predates the latest downturn. 

Leasehold is becoming another factor in apartment valuations

Most flats in England have historically been sold on a leasehold basis. A leaseholder owns the right to occupy and use a property for a specified period, while another party may hold the freehold interest in the land and building. Leaseholders can also be liable for service charges covering management, insurance, maintenance and major works, while older contracts may include ground rent.

The structure is particularly important in London. England had an estimated 4.90 million leasehold homes in 2024-25, equal to 20% of its housing stock, including 3.38 million flats. London accounted for about 1.44 million leasehold dwellings, or 39% of all homes in the capital. The city has roughly 2.08 million flats within a total housing stock of about 3.70 million properties. London’s leasehold share has increased from 34% to 39% over the past five years, according to the latest Ministry of Housing, Communities and Local Government estimates.

Leasehold does not automatically make a flat a poor investment. Many properties have very long leases, negligible ground rents and manageable running costs. Problems become more significant when short remaining terms, high charges, difficult management arrangements or expensive future works affect mortgageability and resale demand.

London service charges continue to climb

Running costs are an increasingly visible part of the affordability calculation. London’s average service charge reached £2,801 a year, or around £233 a month, in 2025. That was 6.4% higher than a year earlier, 41.2% above the level five years ago and 64.5% higher than a decade ago. Across England and Wales, 37% of flats now have annual service charges worth more than 1% of the property’s value, compared with 29% five years ago. Some mortgage lenders have tightened underwriting for flats where charges are particularly high relative to the property value, Hamptons reported.

Charges vary widely between developments. Buildings with lifts, concierge services, gyms, landscaped areas and extensive communal facilities are typically more expensive to run, while reserve-fund contributions for future major works can raise the annual bill further. A flat with a relatively low purchase price can therefore carry much higher monthly ownership costs than the headline valuation suggests.

Leaseholders report growing problems with resale

Consumer dissatisfaction is also visible in industry research. Propertymark surveyed more than 1,200 leaseholders and over 200 property professionals and found that 93% of leaseholders would not buy another leasehold property. Service charges had risen for 86% during the previous two years, while 89% said challenging unfair charges was difficult. About 74% of estate agents identified onerous service charges as the main obstacle to selling leasehold flats, and more than 78% had removed at least one property from the market in the previous two years because it could not be sold.

Those findings do not establish how much of London’s price decline can be attributed directly to tenure. Buyers also assess location, building condition, lease length, management standards and expected repair costs. They do show why two otherwise similar flats can carry different valuations once their contractual obligations are examined.

Building-safety issues still affect some transactions

The apartment market is also dealing with the legacy of the post-Grenfell building-safety crisis. Mortgage lenders and valuers may request an EWS1 external-wall assessment for certain blocks. The form is not a statutory requirement for selling a home, but individual lenders decide when they need one.

Government protections have limited certain historic remediation costs for qualifying leaseholders, and major lenders have agreed to consider mortgages in buildings where safety work is funded by a developer or government scheme. Even so, external-wall problems and remediation schedules can continue to affect individual properties. In the latest published government dataset, an EWS1 or equivalent was required in almost half of mortgage valuations involving flats in buildings of seven storeys or more.

Mortgage costs continue to restrain demand

Borrowing remains expensive compared with much of the previous decade. The Bank of England kept Bank Rate at 3.75% on July 30, with six members of the Monetary Policy Committee voting to hold and three favouring an increase to 4%. The next decision is scheduled for September 17.

London is particularly sensitive to borrowing costs because a £431,000 average flat remains almost £140,000 more expensive than the average property across England, which was worth about £293,000 in June. Service charges can further reduce affordability because lenders may take recurring property costs into account when deciding how much a borrower can afford.

Britain plans to make commonhold the standard for new flats

The government wants commonhold to become the default ownership structure for new apartments. Under commonhold, an owner holds their individual unit indefinitely while owners collectively manage the shared parts of the building through a commonhold association. The system has existed in England and Wales since 2002 but has seen little adoption.

The draft Commonhold and Leasehold Reform Bill was published on January 27, 2026. It proposes banning leasehold for most new flats, making it easier for existing buildings to convert to commonhold, replacing parts of the current enforcement regime and capping ground rents in older leases at £250 a year before they fall to a peppercorn after 40 years. Ground rents on most qualifying new long residential leases have already effectively been abolished under legislation that took effect in 2022.

Consultation on the ban for new leasehold flats closed on April 24. After examining the draft legislation, the House of Commons Housing, Communities and Local Government Committee called for the final bill to be introduced in autumn 2026 and recommended changes to several parts of the proposed regime, including commonhold conversion and the timetable for the ground-rent cap.

Existing leasehold flats will not convert automatically

The proposed ban on new leasehold apartments would leave millions of existing leases in place. The government’s draft framework would make commonhold conversion possible where at least 50% of qualifying leaseholders support it, lowering one of the barriers under the existing system. Buildings would still have to resolve questions involving ownership interests, mortgages, management and shared finances.

That transition could produce a clearer difference between old and new stock. A buyer may eventually be choosing between a newly built commonhold apartment with indefinite ownership and an existing leasehold flat carrying contractual obligations and possible future conversion costs.

The outcome will not be uniform. A leasehold flat with a very long remaining term, minimal ground rent, reasonable service charges and a well-managed building may remain highly marketable. Reforms that make lease extensions, freehold purchases and commonhold conversions easier could also improve the position of some existing owners.

The final bill has yet to reach Parliament

As of September 7, 2026, the government’s legislation remained in draft form after pre-legislative scrutiny. The final Commonhold and Leasehold Reform Bill had not yet been introduced. Labour MP Ian Byrne submitted a written parliamentary question on September 3 asking when the government planned to introduce it, with an answer due by September 14. A separate question asks whether the government still intends to end the leasehold system during the current Parliament.

That leaves the property market without a final timetable for implementation. The legislation could still change in areas including exemptions from the new-flat ban, conversion rules and the timing of the ground-rent cap.

As International Investment experts note, London’s flat-price decline should not be attributed to leasehold reform alone. Higher mortgage costs, rising service charges, building-specific safety issues and weaker demand for apartments are already affecting the market. The reform could, however, widen the existing divide if commonhold quickly becomes the standard for new developments while converting legacy buildings remains slow or expensive. For investors, London’s headline average flat price is becoming a less useful measure on its own: lease length, ground rent, service charges, building condition and the practical route to commonhold can have a greater influence on the future liquidity of an individual property.

FAQ

What is the average London flat price in 2026?

The average flat or maisonette was worth about £431,000 in June 2026, down 4.7% from a year earlier.

How have London flat prices performed over a decade?

On the revised official series cited by Bloomberg, the average London flat is worth roughly £2,000 less than it was ten years earlier. In inflation-adjusted terms, the decline is considerably larger.

What is leasehold?

Leasehold gives a buyer ownership rights to a property for a specified term. Another party may retain the freehold interest in the land and building.

What is commonhold?

Commonhold allows an owner to hold an apartment indefinitely while owners collectively manage the shared parts of the building through a commonhold association.

Is Britain banning leasehold flats?

The government intends to ban leasehold for most new flats in England and Wales. The final legislation had not been enacted as of September 7, 2026.

What will happen to existing leasehold apartments?

Existing leases will continue to operate. The proposed legislation is designed to make conversion to commonhold easier, but it will remain a separate process.

Why are London flats falling faster than houses?

There is no single cause. Mortgage costs, service charges, building-safety issues, leasehold terms and changes in buyer demand are all affecting the market.

Could the reform reduce the value of existing leasehold flats?

The legislation does not impose an automatic reduction in value. A market discount could emerge where buyers prefer comparable commonhold properties with simpler ownership and lower contractual risks.