Buyers pay more than double to secure a freehold home in some areas of the nation
The latest research by Yopa has shown that whilst the average homebuyer across England and Wales will pay as much as 30% more for a freehold home, this premium climbs to over double the value of a leasehold property in some parts of the nation.
Yopa analysed Land Registry price paid data for every residential transaction to have completed across England and Wales over the last 12 months, calculating the median price paid and how this price is impacted when comparing freehold and leasehold property purchases.
The research shows that, over the last 12 months, the average homebuyer across England and Wales has paid £292,500. However, freehold purchases averaged £310,000, while leaseholds averaged £230,000, meaning that freehold properties commanded a 29.6% house price premium.
Freehold homes often carry greater appeal because the owner controls both the property and the land, meaning there is no ground rent, no service charges, no lease length or extension issues, and fewer restrictions on alterations, pets, sub-letting or fees for permissions. These advantages typically drive stronger demand and higher prices, whilst the appeal of leasehold properties has also been dented in recent years, with scandals around escalating ground rents and excessive service charges making headlines.
Regionally, the highest freehold premiums are seen in the South East where freehold properties have sold for 60.6% more than leasehold homes over the last year.
Strong freehold premiums have also been paid across the East Midlands (59.5%), West Midlands (54.7%), East of England (54.2%) and South West (53.8%).
However in some local markets, buyers are paying more than twice as much to secure a freehold. In the City of Westminster, the median freehold price was £2,700,000 compared to £785,000 for leasehold, a premium of £1,915,000 or 109.9%.
The next highest premiums were found in Kensington and Chelsea (102.5%), Isles of Scilly (97.0%), Camden (95.5%), South Holland (95.4%), Islington (90.8%), Forest of Dean (86.6%), Boston (86.3%), Hammersmith and Fulham (85.7%) and Wychavon (85.7%).
Notably, it is not just London driving these results, rural and coastal districts such as the Isles of Scilly, South Holland, Forest of Dean, Boston and Wychavon also sit within the top ten.
Verona Frankish, CEO of Yopa, commented:
“Leasehold properties may predominantly be flats and apartments which is a factor with respect to the lower price paid in some areas of the market, however, many leaseholds are also located in popular urban hubs where underlying values can be higher, which helps to balance the picture when comparing prices.
Regardless of property type and location, the figures show that those looking to purchase a freehold will pay a considerable premium versus leasehold properties and this is largely down to the benefits they offer – such as the absence of ongoing costs like ground rent and service charges.
Leasehold homes have also attracted bad press in recent years which has left a lasting mark on buyer sentiment, with scandals around escalating ground rents and excessive service charges making headlines and deterring many from leasehold ownership.
However, we have seen the Government act to help boost the popularity of leasehold properties in recent years, with the Leasehold Reform (Ground Rent) Act 2022, which banned ground rents on most new long leases, and the Leasehold and Freehold Reform Act 2024, both introduced to create a fairer more transparent landscape.
These measures are designed to better protect leaseholders and may in time narrow the gap in prices, but for now the greater security, simplicity and peace of mind offered by freehold continues to justify a premium in the eyes of most buyers.”
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