Over the course of the last year, leaseholders have seen their service charges bumped up by 8.0%. This has been driven by the increased cost of building materials and insurance. In particular, energy-intensive construction products and anything containing a microchip are still recording double-digit value increases.
This means that at the halfway point of 2023, the average annual service charge for a flat in England and Wales stood at £1,431, equating to £119 per month. This figure includes all flats where a service charge is paid on a regular basis. Houses where a service charge is payable, alongside the small minority of flats where there is no formal service charge, are not included in the figures.
Service charges have increased 51.7% since 2018 when they averaged £943, which was the last time they stood below £1,000 per year. 37% of this increase came between 2018 and 2019, which predominantly reflected the large number of fire safety measures which were put in place in the wake of the Grenfell Tower disaster.
These higher bills were put towards expensive short-term fixes such as waking watches, or medium-term structural remedies which sat outside the scope of either the government’s or developer’s funds. In most cases though, these hefty increases should be behind leaseholders now although it won’t happen overnight.
Commercial contracts for communal utilities are exempt from the energy price cap with many freeholders signing fixed commercial agreements at higher prices. This means it will take some time for prices to fall. Today, the average one-bed service charge stands at £1,287 per year, the same as what a three-bed paid in 2018. At the halfway mark in 2023, the average two-bed paid £1,326 and the average three-bed £1,876.
Service charges are typically much higher in London than anywhere else in the country. At £1,792 per year, they stand 25% above the average for England & Wales. While this partly reflects the higher cost of living in the capital, it predominantly reflects higher densities and in many cases buildings with more amenities. Here, 20% pay more than £4,000 annually, compared to 11% across England & Wales.
The smallest blocks and converted houses tend to offer the lowest service charges. In blocks containing less than five flats, average annual service charges stand at £1,309. Limited communal space or grounds, coupled with residents carrying out a higher proportion of the maintenance themselves, keeps charges low.
Around half of all flats in England & Wales are in blocks of 20 or more. At an average of £2,606 each year, service charges are 99.0% more than in the smallest blocks. Higher service charges here typically reflect the more complex nature of larger buildings alongside the additional service being offered in larger blocks, such as a gym, concierge and communal grounds.
As higher interest rates bear down on the housing market and housebuilders, there's likely to be increased future downward pressure on the price of trades and building materials which make up a big chunk of the typical service bill.
Methodology
The service charge index calculates the average amount the 5.4 million flat leaseholders in England & Wales hand over in service charges each year. Data on service charge levels is gathered at the point of sale and is used to calculate what other flats in the building are paying. Having an estimate of service charges for every flat in the country allows us to estimate the average bill nationally and how it has changed from previous years.
