Second-Steppers Face Housing Market Deadlock as Flat Values Lag Behind Houses

Many homeowners aiming to move from their first flat to a larger property, a group often referred to as 'second-steppers,' are facing a stalled housing market. A primary reason for this difficulty is the depressed state of the flat market, which has seen significantly slower price growth compared to houses over the past several years. According to Zoopla, while UK house prices have increased by 43 percent since 2016, flats have only seen a 10 percent rise in the same period. This disparity has created the widest gap in 30 years between the average cost of a house and a flat, with houses now costing 1.7 times more than flats.

These challenges are compounded by factors such as leasehold issues, escalating service charges, and concerns over cladding, which have diminished the appeal of flats to potential buyers. Consequently, the number of available buyers for these properties has dwindled, further impacting their value. Homeowners like Tom, 40, have experienced lengthy sales processes, with one move taking over a year and multiple sales falling through. He noted the difficulty of dealing with 'unrealistic buyers unwilling to pull the trigger' while simultaneously competing for larger homes.

Second-steppers also find themselves competing with downsizers who may have greater purchasing power, or with older first-time buyers who are bypassing flats and purchasing small houses directly. The financial hurdle is further amplified by elevated mortgage rates and associated moving costs, including stamp duty, widening the gap between what they can sell their current flat for and the price of their next intended home.

Property experts suggest that creative solutions are necessary. Some second-steppers are reconsidering their desired locations to find better value, even if it means a longer commute. For instance, the price gap between a two-bedroom flat and a three-bedroom house is most pronounced in London, where the difference can reach £232,319. In contrast, the gap is smaller in the North East, averaging £65,236.

Lucian Cook, head of residential research at Savills, stated that elevated mortgage rates make it challenging for those looking to upsize, particularly in London and the South East. However, he noted emerging opportunities in other parts of the country, often requiring buyers to broaden their search areas.

Hayley, 34, a journalist, has been trying to sell her two-bedroom flat in Greenwich for a year, aiming to move with her husband to St Albans to be closer to family. The price difference is substantial, with their current flat valued between £450,000 and £460,000, while similar homes in St Albans cost between £700,000 and £750,000. Despite changing estate agents twice and reducing the price, Hayley feels 'stuck' due to the number of similar flats on the market and a perceived lack of demand in London.

To improve sale prospects, Chris Husson Martin, director of sales at Hamptons, recommends making modest improvements to the property, such as updating decor, kitchens, or bathrooms, and enhancing balconies. He also observes a trend of second-steppers being more flexible with location and property type, searching in areas that offer better value and long-term potential.

Some individuals are opting to skip the initial flat-buying stage altogether. Sam Hoare, 32, a football coach, and his wife Victoria recently purchased a three-bedroom house in Kent after renting for over four years in London. The birth of their child prompted the move, and they utilized a developer's deposit contribution. Despite a longer commute, Sam expressed satisfaction, stating, "We feel sorted now, we can plan for the future, including schools, and I'm sure we'll own this house for ever."