The average price of an inner London flat has fallen £46,000 in the year to August, according to Land Registry figures, as flat owners facing years of difficulties with leasehold complications, service charges and cladding decide to exit the market at reduced prices.
When one flat owner cuts their asking price, it effectively sets a new benchmark for neighbouring properties in the same building, forcing others to reduce their valuations accordingly. Nearly four in ten London flats during the year to August changed hands for less than their previous purchase price, according to analysis by E Surv Chartered Surveyors. That figure excludes brand new properties and looked at flats that had been owned for between five and ten years. Around one-third of flats resold in both the South East and East of England changed hands for less than their previous purchase price, compared with just over one quarter across Britain as a whole. New build buyers have suffered particularly steep losses, with 71 per cent of London flats bought new between 2020 and 2022 and resold between January and June 2026 selling below the purchase price, according to analysis by property data site Where To Live.
The problem is particularly acute in large apartment blocks where dozens of identical properties compete directly with one another. Estate agents report that the average agent currently has around 12 to 13 flats for sale, up from around eight per agent in 2019, according to Zoopla. In Birmingham, one estate agent recorded a one-bedroom apartment with parking in a good block near the city centre selling for £55,000 at auction, against an original marketing price of £140,000 only six months earlier. Philip Jackson, director of Maguire Jackson estate agents in Birmingham, says there is currently an over-supply of flats with more and more people trying to sell and nowhere near enough willing buyers. Nicholas Austin, branch manager at RiverHomes in London, explains that when one flat in a large development reduces its price by 10 per cent, all the others must follow because identical properties are easy to value and compare.
The falls create additional difficulties for homeowners trying to remortgage or obtain new mortgages. Lenders value properties by comparing them to others in the vicinity, and if neighbouring prices have plummeted they may refuse to lend the amount needed. Some banks have tightened their rules and now won't offer mortgages on flats where the annual service charge exceeds 1 per cent of the property's value. In 2025, some 37 per cent of flats had an annual service charge exceeding 1 per cent, according to property firm Hamptons, up from 28 per cent a decade earlier. This could leave homeowners at risk of negative equity, where the property value falls below the mortgage borrowed against it.
The struggles of flat owners contrast sharply with the broader housing market. UK flat prices have only risen 7 per cent on average over the past decade while the average house is up 36 per cent, according to Zoopla. The gap between the average house price and flat price has risen from £108,096 in 2016 to £192,533 in 2026, standing at a 30-year high. Older flats in converted houses and mansion blocks are showing greater resilience because they tend to have lower service charges and each property is unique rather than one of dozens of identical units.
For savers and borrowers, flat ownership is becoming a riskier investment with tighter lending rules, higher service charges and the potential for significant negative equity if prices continue to fall in large developments.