Finance

Leasehold concerns hit five year high according to new research

Warren Lewis
|
26th March 2019
Landlord Keys 22

Issues surrounding the UK's outdated leasehold/ freehold system are soaring faster than at any point since 2014.

According to a new YouGov survey conducted on behalf of HomeOwners Alliance, BLP Insurance andResi.co.uk architects, 60% of UK adults say the current leasehold/ freehold system is a serious problem that needs addressing as a matter of priority.

The survey, which polled more than 2,000 UK adults, also found that quality of Britain’s homes is the fastest growing issue. Almost two thirds (63%) of UK adults now cite it as a serious concern, up 6% from 2018, while nearly seven in ten people (69%) living in rented accommodation report serious concerns with housing stock quality.

Paula Higgins, Chief Executive HomeOwners Alliance, says: “It is shocking that in a country that is a leading world economy that so many people have serious concerns about the quality of our old and new housing stock, whether they are renting or are owner occupiers. We need more decent housing for more of us.”

Leaseholds open to corruption?

This year’s survey took a deep dive into challenges facing leaseholders. The much-criticised leasehold system has been the fastest rising housing issue over the past five years. Three in five (60%) UK adults now say the leasehold/ freehold system - including service charges, ground rent and other fees - is a serious problem. This is up from 42% in 2015. The issue registers similar levels of concern across all regions in England.

More than a quarter (26%) of leaseholders complained about the high cost of works and management fees while just under a quarter objected to unfair service charges (22%) and a lack of control over which major works are done (23%).

Paula Higgins, Chief Executive of the HomeOwners Alliance, says: “The HomeOwners Alliance urges the Government to take action now to abolish the leasehold system. Only last week MPs highlighted the fact that developers, freeholders and managing agents treat homeowners as a source of steady profit.

As a membership organisation representing homeowners we want to see a better deal. If the Government was really serious about this then they should commit themselves to widespread reform instead of the piecemeal approach they have adopted - making well intentioned announcements with no timetable for action. They can’t hide behind Brexit while homeowners continue being mis-sold leasehold, left trapped in their own homes with rising ground rents and unable to buy the freehold.”

First-time buyers - or home-owning no hopers?

Meanwhile the crisis for first time buyers (FTBs) has reached the largest recorded levels. More than nine in ten (91%) aspiring first-time buyers saying the ability to get on the property ladder is a serious problem, while 88% say house prices and 87% say saving for a deposit are serious problems. This comes against a backdrop of Government initiatives, such as the abolition of stamp duty for FTBs and higher levels of lending for them.

Paula Higgins, Chief Executive HOA, says: “Even more needs to be done to help first time buyers get on the ladder - such as abolishing stamp duty among all first time buyers.”

House sale and value nightmares

Two trends indicate a lack of confidence in house prices:

1. Gazundering has risen as an issue. This is when buyers drop their offer price just before the sale. It has escalated from 40% last year to 45% in 2019.
2. Likewise anxieties about negative equity have mounted. Some 45% of UK adults have described this as a problem.

Paula Higgins, Chief Executive HOA, says: “People crave more certainty in the housing market – that the price agreed at point of sale will be the price paid. Reservation agreements to be piloted by government should reduce peoples’ concerns over gazunderng and gazumping.”

Regional trends

While levels of happiness among homeowners were highest among the Welsh, who also voted in favour of Brexit, and lowest among the Northern Irish, who voted to remain in the EU.

Two-thirds of those in Northern Ireland (69%) say they are really worried about negative equity. Northern Ireland is yet to fully recover from the 2008-9 credit crunch and house price crash, it has had no functioning devolved government since 2017 and is set to be the UK region most badly affected by Brexit because of its border with the Republic of Ireland.

Kim Vernau, Chief Executive Officer, BLP Insurance, says: “The results of this survey cast another dark shadow over a housing industry rife with systematic faults. The Government and the housebuilding industry have come under severe pressure to meet targets and boost housing volumes. This has resulted in a noticeable drop in both the practical design and build quality of new houses, as well as poorly thought through schemes, such Help-to-Buy.

The government scheme has buoyed the residential sector, keeping prices artificially high, but cracks have started to appear, and its collapse could leave thousands of first time buyers stranded in negative equity. In an already stagnating market, where harmful practices like guzundering are commonplace, poor quality of build and the plausible threat of depreciating asset value are compounding pre-existing caution from potential buyers and investors. To restore confidence in a faltering sector, more emphasis needs to be placed on improving quality of build and resisting short-term populist solutions to our deepening housing crisis.”

Alex Depledge, CEO of Resi.co.uk, says: 'Housebuilders keep churning out badly-built boxes. They prioritise profit rather than the living environment. This poorly-designed housing stock is having an increasingly profound effect on the nation's mental health and productivity. It's scientifically proven that people respond well to beautiful facades and large windows, which is why Georgian and Victorian properties are so enduringly popular and expensive. But everyone has the right to live in a well-designed property. Solving the issue of poor housing stock would address so many other issues in society.”

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