Central London's cost problem

The narrative around London’s housing market often focuses on headline price moves in prime postcodes. On the ground, however, brokers are contending with a more prosaic problem: service charges, running costs and transaction taxes that are quietly reshaping what buyers can, and will, take on.

For James Carter at Independent James, the sharpest stress points are in the very centre of the capital – and particularly in blocks where post‑Grenfell remediation and rising insurance costs are pushing monthly charges to new highs.

“Right in the heart of London – around Soho, for instance – a lot of flats just aren’t shifting. High and rising service charges are a major issue,” he told Mortgage Introducer.

Service‑charge inflation bites

Carter says fire‑safety works and tighter building standards have been necessary, but they come with a financial sting that is now feeding directly into affordability calculations and valuations.

“Since the post‑Grenfell focus on fire safety, many central London blocks have had to double down on remedial works. The knock‑on effect is higher insurance and maintenance costs, which filter straight through into service charges,” he explains.

“Even when the increases are ‘only’ inflationary, when you see the numbers in black and white it often works out at £500 a month more than a few years ago. That’s having a real impact on valuations and buyer appetite.”

For buyers already stretched by higher mortgage rates, an extra £500 a month on top of their repayment is difficult to justify – particularly when there is still uncertainty around future works or potential cladding issues. According to Carter, that’s one reason “we’re definitely seeing bigger reductions in prime central areas. Buyers know they have leverage, especially where running costs are high.”

Where demand is holding up

The picture looks very different in what Carter calls “core residential” zones – the family‑driven postcodes where schools, transport and community amenities matter more than a central London address.

“In contrast, demand is much more resilient in core residential areas with good schools and strong amenities,” he says. “The classic family‑home drivers are still there – people will stretch for the right house in the right catchment.”

Here, service charges are less of a concern because the stock is more likely to be freehold houses or smaller, less complex blocks. Instead, the main barrier is the sheer cost of moving up the ladder from a flat to a house.

“One of the biggest frictions in London is the jump from apartment to house,” Carter notes. “By the time you factor in a higher purchase price, agent fees and stamp duty, you’re typically looking at a minimum of £50,000 just to make that move. That’s encouraging some buyers to sit tight, save longer and try to skip a rung so their next purchase is somewhere they can stay for the long term.”

First‑time buyers get more forensic

Paradoxically, while some existing owners are delaying moves, Carter is seeing more activity from first‑time buyers – but they are approaching the market with a more forensic mindset.

“We’re actually seeing more enquiries from first‑time buyers,” he says. “They’re very focused on buying something affordable that they can stay in for longer – and they are asking much more detailed questions about service charges, how rigorous the management company is and what could happen to costs over the next few years.”

That caution is spilling over into negotiations. In many parts of London, Carter believes a meaningful haircut to asking prices is now a fair expectation.

“Clients are pushing hard on price. In many parts of London, a 10% discount to asking is realistic if you’re well‑prepared and the property’s been sitting on the market,” he says.

For brokers, that means carefully calibrating affordability assessments and product recommendations to a range of possible purchase prices – and preparing clients for the reality that some sellers will hold firm while others quietly cut late in the process to keep chains together.

Bridging: attractive in theory, painful in practice

Against a backdrop of slower sales, bridging finance has understandably been floated more often as a way to preserve onward purchases. Yet Carter says that in his sub‑£1 million core market, the economics of bridging still put most clients off.

“As usual with bridging, lots of people like the idea in principle – they want to explore it – but around 90% ultimately baulk at the cost once we’ve gone through the numbers,” he explained.

That reflects a wider recalibration of risk appetite among mainstream London buyers. Where ultra‑high‑net‑worth clients might view short‑term funding costs as a price of flexibility, typical city professionals are more sensitive to every line item in the monthly budget.

Stamp duty and the ‘should I move at all?’ question

If service charges and bridging costs are altering the shape of the deal, stamp duty is increasingly determining whether the deal happens at all.

“Stamp duty has become a real blocker to people moving up the chain,” says Carter. “It used to be a no‑brainer that buying was better than renting, but when you look at the entry and exit transaction costs now, that upgrade move is a much bigger decision.”

For brokers, that means more conversations that look beyond the immediate purchase and into five‑ or 10‑year horizons: How long will a client realistically stay? Will they outgrow the property? Does it still make sense if they have to move again and pay another round of stamp duty and fees?

In a London market defined less by simple price trends and more by cost of ownership, brokers are having to play a bigger role in helping clients interrogate every element of the outgoings – from mortgage rate to service charge and transaction tax. The deals that still get done, Carter suggests, are the ones where buyers feel they’re not just getting an address, but long‑term value they can live with.