Is a freehold property worth more than leasehold?

Bananamilk_2

As a general rule of thumb, should I expect our 1 bed terraced house (unusual I know) to be worth more than a 1 bed leasehold flat in the local area?

There are very few similar properties to ours in the area and none have sold in the past 5 years as far as I can see. (We're currently letting it, so haven't discussed selling with our tenants yet.)

I was thinking it might be worth about 10% more than a comparable leasehold flat?

Any ideas?

BitterAndTwisted

It would be worth more to me but a lot depends on the covenants

princeofpounds

Yes, it probably would be worth more.

The owner would have more control over maintenance, and would not have to pay any ground rent (although on older properties that is often minimal anyway, depends on the lease agreement).

Plus if there are any opportunities to extend etc. it will be more straightforward. Not that this might be that relevant.

And there will be a section of people who prefer houses to flats full stop, particularly if you have outside space.

Regarding valuation, I suggest you look at 2 bed flats vs 2 bed houses, that might give you some idea of a ballpark premium you might want to aim for. Or, alternatively, look at them on a per sqm basis for even more comparability. But it's never going to that precise as it's such an unusual asset.

G_M

You cannot really compare the value of a house against the value of a flat.

However, if you had two identical houses, side by side, in similar condition, and one was freehold and the other was leasehold, then yes, the freehold one would be more attractive to buyers who would be prepared to pay more.

Much would also depend on the length of the lease, but even with a 999 year lease, the freehold would have a premium.

JimmyTheWig

I agree the freehold house would, in general, be worth more than the leasehold flat. 10%, or even 20%, more I'd say.

Obviously a lot has got to do with the street that it is in, etc...

somethingcorporate

Depends on the sizes of the flat and house in question. 20% could be pushing it comparing a luxury, big (1 bed flat) to a horrible little pokey 1-bed terrace but if they are similar in specs and size I would think 10% premium would be reasonable.

I'd go for the freehold every time (and I own both).

Lokolo

There are more factors to consider, such as location.

I chose a 2 bed flat (90 year lease) over a 3 bed house (freehold). They were both the same price.

The house was in an area with high crime and was inconvinient, but bigger and obviously a freehold. The flat was the opposite.

tim123456789

Bananamilk wrote: »

As a general rule of thumb, should I expect our 1 bed terraced house (unusual I know) to be worth more than a 1 bed leasehold flat in the local area?

There are very few similar properties to ours in the area and none have sold in the past 5 years as far as I can see. (We're currently letting it, so haven't discussed selling with our tenants yet.)

I was thinking it might be worth about 10% more than a comparable leasehold flat?

Any ideas?

size for size, houses are usually more expensive than flats.

Though during the BTL boom people started to construct poky little "executive" flats priced at more than equivalent houses. These are the ones that have lost most value in the crash

tim

Bananamilk_2

Thanks everyone for these really helpful replies. That is reassuring. Of course, when I bought the property, I was also looking at 1 bed flats in the same area, and I ended up choosing the house exactly because it was a house, so it felt like I was getting more space with it being configured over 2 floors, plus it was freehold, and it has a little garden as well.

Feel much happier now that most people seem to agree that a freehold is preferable. All replies much appreciated. :T

JimmyTheWig

Bananamilk wrote: »

when I bought the property...

That might be the best judge of value.
When you bought it, how did its value compare to 1 bed flats?

Bananamilk_2

Good point JimmytheWig. When I bought it, it was on for about 10% more than the 1 bed flats I was looking at, so I think you've helped me answer my question! Thanks!