Housing downturn reduces prices of lease extensions
Extending your lease in a falling market is cheaper as the property value is taken into account during a lease extension valuation according to The Ringley Group. This cost reduction presents an investment opportunity for leaseholders to add value to their property and increase its marketing potential.
A leaseholders statutory right to extend a lease by an additional 90 years and get the ground rent reduced to peppercorn if they have owned the property for two years has become more affordable in the current economic climate.
The shorter the lease the less your property is worth and it may also become difficult to sell. Therefore, if you are going to extend the leasehold now is a good time, explains Mary-Anne Bowring, Managing Director of The Ringley Group.
The cost of a lease extension on a £198,000 flat with a short lease of 60 years would have been in the region of £26,900. However, as a result of the 10% market fall this will now cost around £24,600 due to the property value dropping to £180, 000.
Owners of properties with leases over 80 years are also being advised by The Ringley Group to invest whilst there is no marriage value to pay.
My advice to anyone with a 99 year lease is to watch out as the clock is ticking especially if the property was built in the late 80s or early 90s. Once the lease drops to 79 years the premium will become higher, perhaps as much as 5% higher just for missing the 80 year cut off point concludes Mary-Anne Bowring.
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