In 2006, Carole Weale bought three buy-to-let properties that she thought would grow in price and could eventually be sold to help her and her husband in retirement.
One of those three properties was a one-bedroom flat in Woking, Surrey, which she bought for £180,000.
Last week, after years of failed sales, she finally sold it – for £148,000.
Property prices on the whole have ballooned over the past two decades. In 2006, the average UK house price was £173,746 – around £100,000 less than the average price today.
But Carole says her story puts to bed the myth that house prices always grow.
“Everyone always says that homes always go up in value and they are a great investment – but this flat went entirely the other way,” the ex-school teacher says.
The property – which is a leasehold flat – was a new-build when Carole first bought it with her husband, and although these often drop a little in value after the first purchase, a sale at such a loss 20 years later is still rare.
But Carole is just glad to finally got it off her hands. She previously had a buyer in 2021 who was considering purchasing it at £240,000, but that fell through.
“They started asking really silly questions and you started to realise they weren’t serious,” she says.
She says the market for this sort of property – a one-bedroom leasehold flat – is not particularly strong at the moment.
“There’s the service charges, the short lease and the fact that lots of landlords who own these homes are selling them because the market has got worse for landlords,” she says.
“It’s also aimed at young execs that would travel into London, but there’s a lot more working from home now,” she says.
Until last year, Carole was renting the property out for £1,175 per month but says she was struggling to turn a profit on it. The services charges were £1,815 annually.
Her mortgage went to £650 when rates rose in 2023, but she says other costs made it difficult to make much money.
She says more than £100 a month goes to the estate agent, £100 goes on service charges and ground rent, and she also has to pay for regular repairs.
She also says tax changes for landlords also affected her, and further changes would impact her more in the future.
Since April 2020, landlords have no longer been able to deduct any mortgage expenses from their rental income to reduce tax bills, and changes in the Budget will increase the rate of income landlords pay by 2 percentage points from next year.
On top of this, Carole adds: “The tenants had a new boiler, carpets, washing machine, everything in the past few years which adds up.
“The profit was actually fairly negligible once you factored everything in.”
Because of the changes, Carole said properties like hers that were once attractive to buy-to-let landlords, were no longer lucrative and so many are selling them.
“The market is flooded with this type of property, which makes it harder to get a good price,” she says.
Due to all the difficulties she has faced with selling the flat in the past, Carole opted for a speedy sale.
“We just had to get rid of it because it was a nightmare,” she says.
The lease was approaching 100 years, after which she believes it would have become very difficult to sell, and after being placed directly on the market, she received no offers.
So at the end of last year Carole ended up trying to sell it to a website that offers to purchase any property. In the end, she sold to an investor for £148,000.
“We bought it on the premise that we would generate a profit on the sale and it would help with pensions, but that has not been the case,” she says. And she says after the issues she’s faced, she wouldn’t recommend people to buy a leasehold flat.
“Houses are safe but I’d almost say don’t bother with apartments altogether. The market is cyclical, I know that from having owned property for 40 years, but at the moment it’s hard for me to see any direction except downwards for flats,” she adds.
Although Carole’s case is unusual because of the scale of the loss, research from Hamptons shows that a portion of property buyers do end up getting less for their property than they paid for it. Last year, 8.7 per cent of sellers got less than they initially paid for their property, Hamptons figures show.
Overall, house prices also have risen at far faster rates than flats.
Last year, Zoopla figures showed that the average value of a flat has increased by just seven per cent over the last five years compared to house values increasing by a quarter (24 per cent).
One key factor behind this, is rising leasehold costs, and awareness of them. Owning a leasehold property means you own the property for a set period but not the land, paying ground rent and service charges to a freeholder. The costs can be high, and as the lease gets shorter you have to pay to extend this.
Reforms to the leasehold system have been promised by the Government.
Ground rents paid by leaseholders will be limited to £250 a year from 2028 before reducing to a peppercorn, or nominal, rent after 40 years.
New leasehold flats will also be banned, while existing leaseholders will get the right to switch to commonhold.
