First time buyers increasingly avoid leasehold flats in England

First time buyers increasingly avoid leasehold flats in England

New data reveals that 80% of leasehold flats on the market in England during 2025 remained unsold after six months, highlighting growing reluctance among first time buyers to purchase leasehold properties.

Research from Pepper Money, reported by The Guardian, shows a significant downturn in demand for leasehold flats among first time buyers. The data indicates that the complexity of leasehold arrangements, high service charges, mortgage difficulties, and mismatched expectations between buyers and sellers are key factors behind this trend. This shift is occurring alongside changes in the demographics of first time buyers, who are now on average older and more likely to have children before purchasing their first home.

The average age of first time buyers in the UK has risen to nearly 34 years, compared with 29 in 2000, and nearly one in three now has children before buying, up from one in four in 2020. This demographic shift means many first time buyers have different housing needs, often seeking larger properties suitable for family life rather than smaller flats.

Leasehold flats face challenges in the current market

Leasehold flats have long been a route into homeownership, especially in urban areas where freehold options are limited. However, recent data suggests that these properties are becoming less attractive to first time buyers. Pepper Money’s analysis found that 80% of leasehold flats listed in 2025 failed to sell within six months, a stark indication of market resistance.

Several factors contribute to this reluctance. Service charges on leasehold flats can be substantial and unpredictable, deterring buyers concerned about ongoing costs. The legal complexity of leasehold agreements, including restrictions on alterations and the eventual expiry of leases, adds further uncertainty. Mortgage lenders may also be hesitant to approve loans on properties with short or complicated leases, limiting buyer access to financing.

Additionally, there is often a disconnect between seller expectations and what first time buyers are willing to pay for leasehold flats, especially given the additional costs and restrictions involved. This mismatch can prolong time on market and reduce sale prices.

Changing first time buyer profile affects housing choices

The profile of first time buyers has evolved considerably over the past two decades. With the average age increasing and a higher proportion having children before purchase, the demand for housing that accommodates family needs has grown. Small leasehold flats, while offering a lower-cost entry point into homeownership, may no longer meet these buyers’ requirements for space and flexibility.

For many, the decision is between buying a smaller property sooner with the intention of moving again later, or continuing to rent while saving for a home that better suits their long-term needs. This trade-off is particularly relevant in expensive areas where home prices remain high relative to earnings.

Pepper Money’s research, which examined over 300 locations across the UK using factors such as local earnings, property prices, rental costs, mortgage repayments, and deposit accessibility, found that the most favourable areas for first time buyers tend to be in the North West and North East of England. These regions offer comparatively better affordability, which may influence where first time buyers look for properties.

Implications for landlords and letting agents

For landlords and letting agents, the decline in demand for leasehold flats among first time buyers has several implications. Properties that might have been sold to owner-occupiers may remain in the rental market longer, increasing the supply of rental flats. This could affect rental prices and tenant demand, especially if the flats require significant management due to leasehold service charges and maintenance responsibilities.

Landlords should be aware of the potential for longer void periods if they are relying on leasehold flats to sell rather than rent. Letting agents may need to adjust marketing strategies and tenant screening to reflect the changing dynamics. Additionally, understanding the leasehold terms and associated costs is essential for managing these properties effectively and advising landlords on compliance and cost control.

Given the complexity and potential risks associated with leasehold flats, landlords should review their portfolios carefully. Properties with short leases or high service charges may require more active management or consideration of alternative strategies, such as lease extensions or negotiating service charge reductions.

What remains uncertain in the leasehold market

The future of leasehold flats remains uncertain amid ongoing reforms and market shifts. Government initiatives aimed at reforming leasehold law and improving transparency around service charges may alter the attractiveness of leasehold properties. However, the pace and impact of such reforms are not yet clear.

Mortgage lender policies towards leasehold properties may also evolve, potentially easing financing constraints if reforms improve leasehold security and clarity. Conversely, if reforms are slow or insufficient, leasehold flats may continue to face market resistance.

Landlords and agents should monitor regulatory developments closely and seek up-to-date guidance on leasehold compliance and management. The evolving profile of first time buyers and their housing preferences will also influence demand patterns, requiring flexibility in portfolio management and letting strategies.

Practical considerations for landlords managing leasehold flats

Landlords with leasehold flats should ensure they have a thorough understanding of the lease terms, including the length of the lease, ground rent obligations, and service charge arrangements. Maintaining clear records of all charges and communications with managing agents or freeholders is crucial for transparency and dispute resolution.

Regular reviews of service charges and lease terms can help identify opportunities to reduce costs or extend leases, enhancing the property’s marketability. Landlords should also consider how leasehold complexities might affect tenant demand and rental income, adjusting rent levels and marketing accordingly.

Letting agents can support landlords by providing detailed explanations of leasehold arrangements to prospective tenants and advising on potential issues. They should also stay informed about legal changes affecting leasehold properties and ensure compliance with safety and property standards.

Keeping your rental properties compliant

Membership of The Landlord Association (TLA) offers landlords and letting agents access to practical compliance resources and expert guidance tailored to managing leasehold flats. TLA’s developing property management platform, ORBIT, currently in BETA testing, aims to help members organise portfolios, manage rental documents, and keep track of key compliance actions.

ORBIT’s features under development include tools to record repairs, inspections, and communications, which are particularly useful for managing the complexities of leasehold properties. Members can also access up-to-date information on leasehold legislation and service charge regulations, helping to prepare for any upcoming changes.

Exploring TLA membership and ORBIT BETA access can provide landlords and agents with support to navigate the challenges of leasehold flat management and maintain compliance in a shifting regulatory environment.

As the leasehold market continues to evolve, staying informed and organised will be essential for landlords and agents to protect their investments and meet tenant expectations.

Sources: Landlord Today