Should you invest in a flat or house in York?

I recently had the pleasure of meeting a client for lunch in a restaurant in York city centre and inevitably as landlords, we got onto one of my favourite topics, property.  Specifically, the Flats vs Houses debate came up.  Now this landlord dogmatically believed that houses are the better investment but mentioned he spoke with one of his friends who swears blind that flats significantly provide better investment potential.

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This poses, a burning question as a landlord or investor in York, ‘should you invest in flats or houses?’

One myth which has worked its way around the property investment world is that you invest in flats for yield and houses for capital growth.  To dispel this myth, as per the Land Registry, as at January 2000, sales prices for York houses (detached, semi & terraced) on average were £83,104 and York flats £49,649.  As at today, houses in York on average sell for £275,846, an uplift of 332% and flats sell for £161,875, a 326% uplift.  As such, there is not much in it in terms of capital appreciation.

As for gross yield, flats rent in York on average for £758 per calendar month and houses, £839 per calendar month.  As such yield on houses in York is on average 3.65% whereas on flats averages 5.62%.

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In light of this flats look to win on this front.  However, let’s not forget that gross yield does not take into consideration service charges & ground rent which is indicative of flats (assuming the property is leasehold) which in York average around £1,000 and £150 per annum respectively each year.  Under closer scrutiny, as these charges are not associated with freehold property this may ‘level the playing field’.

Interestingly in York, over the last year, of properties sold per month, 27% related to flats and 73% related to houses and on average time on market for houses was 93 days whereas average time on market for flats was 131 days indicating York owner occupiers and investors seemingly have a preference for houses over flats.

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One other determinant of which type of property forms the better investment is how it performs under stressful situations such as a property crash.  Prior to the 2008 crash, inflationary pressures had caused the average house in York to sell for £228,500 and flats for £149,000 as at Q2 2007.  Both flats and houses began to fall in price and by end of Q1 2009 had closely fallen by 17-18% until they both collectively started to recover in Q2 2009.  Since this point on average flats recovered at a rate of 0.79% per quarter whereas houses slightly better at 1.09%.

As indicated earlier, flats (leasehold) are subject to service charges and ground rents which may make houses a sounder investment.  However, in my experience of lettings and property management, significantly more issues are reported in houses than in flats purely because houses are larger properties and simply, more things can go wrong.

In conclusion, there isn’t as much difference between investing in flats vs houses as would seem.  It really depends on one’s personal circumstances and their personal preference.  Both types offer their benefits and drawbacks but whichever option one decides to go down, whether it be solely houses, flats or a mixture of the two, one certainty is the ability to achieve long-term wealth investing in the York property market.


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