The so-called ground rent scandal has prompted the launch of a government consultation into leasehold reform. One surprise is just how widespread is the practice of selling newly built houses as leasehold, a practice that seems to have been growing over time. Given that the Land Registry publishes details of all housing transaction since 1995, plotting changes in the pattern of leasehold versus freehold for each type of newly built home is easy.
Of course leasehold sales have risen mostly because flats have become more popular, as the proportion of new build freehold flats is tiny (see chart). Throughout 2005-9 the majority of new builds were leasehold, partly because when the housing market tanked in the financial crisis flat sales declined proportionately less. Once the market recovered, leaseholds overall fell back to around 40% of total sales, markedly above the 23% of the 1990s.
But this rise is not only due to more flats being sold. The chart shows newly built property tenure as a proportion of total sales by type. Although more than 7% of semi-detached and terraced new builds were leasehold even in 1995, this rose sharply in the financial crisis and stayed higher. In the 1990s fewer than 5% of newly built detached houses were sold as leasehold. But sales of leasehold ‘not-flats’ (including detached houses) have converged to over 14% of all newly built properties, and a lot of this change is a recent phenomenon.
So yes, they’re a thing.
Andrew Blake works in the Bank’s CCBS Division.
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