Want to grab a bargain when it comes to somewhere to live? Try this

Flats are about as fashionable in Britain as a winter sun break in Rhyl – no surprise, then, that as Nationwide says house prices are rising again, flats are still falling behind, with Zoopla saying the gap is as big as ever.

This is bad news for Angela Rayner: after all, building flats is the fastest way to fix Britain’ housing crisis (and key to economic growth). But what if we addressed sky high service charges and leasehold reform?

Flats could, in fact, be the key to solving Britain’s housing crisis – because it won’t be a shock to anyone that the cost of getting on the housing ladder continues to rise. Nationwide put growth at 3.9 per cent on the year. Property website Zoopla quoted a more restrained 1.9 per cent. That’s quite the gap, but remember the way the numbers are collated are specific to the businesses concerned.

Where it gets interesting is what Zoopla had to say about those flats vs houses. Its average house price (£319,500) was 1.7 times, or 67 per cent higher, than the average cost of a flat (£191,300). That there is a gap isn’t surprising. Houses are bigger. They come with things like gardens, which people like to have especially when they start having children. But the way the gap has grown is still striking.

Zoopla also said it had seen an increase in the number of flats listed for sale and that this was running well ahead of the growth in completed transactions. That indicates a mismatch between supply and demand and helps to explain its finding that flat prices inched up by just 0.5 per cent compared to 2.2 per cent for houses.

There are a number of reasons for why this might be happening. The gap between the two jumped during the pandemic because being confined to one’s home put a premium on space. Then there was Grenfell, and the cladding scandal that emerged in the wake of that horrible tragedy. The bills for fixing the cladding problem have been eye popping. As a result, Zoopla says that in some areas “transaction volumes for affected properties have dropped by as much as 85 per cent”. You cannot help but feel for those left in an invidious position through no fault of their own.

The widely-reported issues with leasehold properties (as flats typically are) have also played a role. Some of the practices indulged in by developers were flat out scandalous (which included houses, too).

Reforming a feudal system was one of those niggling problems that generated a great deal of hot air but little in the way of action for years. But the Leasehold & Freehold Reform Act received royal assent last May, with the final parliamentary stages of the bill fast-tracked before the general election.

The Act aims to make it cheaper and easier for leaseholders to extend their lease for a much longer period (990 years being the standard) with ground rents reduced to a peppercorn following the payment of a premium. Some of its provisions are specific to flats, making it easier for leaseholders to take over the management of their building while improving the transparency of service charges. Even now, these create scandal when bills for maintenance of common areas suddenly shoot up.

Unfortunately, the majority of the Act’s provisions are not yet in force. Many, we are told, require further consultation and secondary legislation to be put into action. The new Labour government promised to deal with this “as quickly as possible” but warned of “the significant complexity of the task and the importance of taking the necessary time to ensure that reforms are watertight.” Housing minister Matthew Pennycook also said there were a small number of “serious flaws” with the Act requiring further legislation to fix.

As I have repeatedly written, Britain faces a housing crisis. The price of purchasing a home is ruinously high whichever of the many measures you care to look at. For the record, Nationwide’s average price sits at £270,493.

Nick Mendes, from broker John Charcol, says mortage rates are easing (a bit) although some of the best deals come with a sting in the tail. “Santander's recent move to offer a two-year fixed rate below 4 per cent... comes with a £1,999 product fee,” he said. However, cheaper mortgages, and the fact that wages continue to rise at a robust rate (6 per cent per the most recent official figures), should make for a robust market through the rest of the year. Even for flats? We’ll see.

Solving Britain’s housing crisis requires more homes to be built. It is, obviously, a lot easier and cheaper to build flats than houses. Flats would greatly assist Labour with meeting its oft quoted target of delivering 1.5m new homes by the end of the Parliament. Critics say it will struggle to meet its goal.

Government business managers and Pennycook should take note. In the meantime, there is here a clear opportunity for those seeking value.