Flat owners in British cities are facing a steep decline in property values, exacerbated by neighbours who are selling their properties at significantly reduced prices. This trend is creating a "downward spiral" that devalues entire blocks and makes it difficult for remaining owners to sell or remortgage their homes.
Official figures show a sharp drop in average prices, with inner London flats falling by £46,000 in the year to August. Analysis by E Surv Chartered Surveyors found that nearly 40 percent of London flats resold between five and ten years after purchase changed hands for less than their original price. Similar trends are seen in the South East and East of England, where about a third of flats resold for less than their purchase price.
Newer flats are experiencing even steeper declines. Data from Where To Live indicates that 71 percent of London flats bought new between 2020 and 2022 and resold in the first half of 2026 sold below their purchase price. Examples illustrate the severity of the situation: a two-bedroom flat in South Kensington, London, bought for £1.06 million 14 years ago, is now on the market for £750,000. Another flat in Clapham, purchased for £483,300 in 2020, is listed at £312,500 after initially being offered at £625,000.
This issue is not confined to London. In Manchester, a flat in Axis Tower is listed at £350,000, down from £500,000, after being bought for £480,000. Similarly, a Birmingham city centre flat bought for £163,950 in 2018 is now listed for £90,000, down from £140,000.
Estate agents attribute the downturn to an oversupply of flats coupled with weak buyer demand. "Many sellers of good but ordinary one and two-bedroom modern apartments... are essentially competing against other sellers within the same building to secure buyers," noted Philip Jackson, director of Maguire Jackson estate agents in Birmingham. Factors such as leasehold complications, high service charges, rising mortgage rates, and economic uncertainty have deterred potential buyers, including first-time buyers and landlords.
The downward price pressure significantly impacts mortgage valuations. Lenders often assess property values based on recent comparable sales within the same building or vicinity. If a neighbour sells at a steep discount, it can reduce the perceived value of other flats, potentially leading lenders to refuse mortgages or offer lower loan amounts. This can push existing owners into remortgaging difficulties or even negative equity, where the loan amount exceeds the property's market value.
"If you once took out a loan that covered 60 per cent of the flat’s value and it now represents 80 per cent of the flat’s value, you’re going to pay a higher rate," explained Nicholas Austin, branch manager at RiverHomes in London. "There is also a risk of negative equity, if someone has bought a flat with a 5 per cent deposit and then it has reduced in value 10-15 per cent."
Adding to the challenges, some lenders have tightened their criteria regarding service charges. Certain banks now refuse mortgages on flats where the annual service charge exceeds 1 percent of the property's value, due to concerns about the ease of selling repossessed properties. In 2025, 37 percent of flats had service charges exceeding this threshold, up from 28 percent a decade prior.
Owners in large apartment blocks, particularly those with numerous identical units, are most vulnerable. The abundance of comparable properties makes valuation straightforward but amplifies price drops across the board. "The bigger the development, the bigger the problem," Austin stated. "If there are 200 identical properties, at least seven of them will be on the market at any given time. If one property has slashed its price by 10 percent, all the others will have to reduce their price by 10 percent too because these flats are identical."
Older flats, such as those in converted houses or mansion blocks, are considered less at risk due to their unique characteristics and generally lower service charges, avoiding the "identikit issues" seen in new builds. Despite the current market depression, some experts believe the market is nearing a plateau. The Renters Reform Act has seen some buy-to-let landlords exit the market, with their properties gradually finding buyers. "Rather than a falling market, we’re entering a stagnant market," Austin concluded.