Service charges escalate into so called ‘hidden costs’ when buying property

New research has revealed that those looking to buy a new apartment are likely to face higher annual service charges than ever before. Direct Line for Business who released the research, state that the average national service charge is £2,777 per year, with some areas in London being as high as £7,000 per year. The research shows that there is a pattern of increases developing year on year that don’t seem in line with average earning or cost of living.

According to the research the increase in cost is due to around a third of property management companies increasing fees coupled with more facilities being offered for many new build blocks, like a 24 hour concierge, a gym, cinema etc.

Service charges are common for apartment living and cover general building maintenance like repairs, cleaning of communal areas, ground maintenance etc. However, the hike in prices could see many people financially squeezed to the limit.

Depending on the development, the costs may vary – for some it is a flat rate regardless of the property size and scale, for others it could be dependent on the overall square footage. So for new buyers it could be wise to check the terms of the deal carefully.

In addition the study shows that it may not be just new apartment owners that are affected as developers on new build family homes have introduced service charges for freehold buyers for road and garden upkeep. This trend could continue which might leave even the savviest of buyers unsure of what they are really getting.

“Service charges are often a hidden cost, which should be factored in when considering the affordability of a property. In some cases service charges are uncapped and can escalate rapidly.” warned Nick Breton, head of Direct Line for Business.