by Siham Ben Amor MD, WER Investments Ltd
Hook
What if your London home came with invisible fees, expiring rights, and built-in friction yet promised lower entry costs than owning outright?
That’s the dilemma every buyer and investor in 2025 faces when comparing leasehold vs freehold in London. With sweeping legislative reform underway and market dynamics shifting, your choice matters more than ever.
Market & Reform Trends (last 12–18 months)
- Transaction volume rising: Greater London saw ~32,000 residential transactions in Q1 2025, a 6.7 % increase year-on-year (martyngerrard.co.uk, NO5 London Property Professionals). Real estate enquiries are up ~17 % across the capital, matched by ~12 % more housing stock availability, the strongest activity in a decade (benhams.com.hk).
- Price momentum slowing in prime central London, especially luxury segments, due to higher mortgage costs and tax shifts, while outer boroughs and family-home markets remain active (The Times).
- Legislative changes accelerating: The Leasehold and Freehold Reform Act 2024 became law in May 2024, but its changes are only now being phased in. Key provisions already live include removal of the two-year ownership rule (as of 31 Jan 2025) and expanded Right-to-Manage and enfranchisement eligibility (from 3 March 2025) (Wikipedia). Further reforms capping service charges, banning new leasehold flats and introducing commonhold are under consultation in mid-2025 (House of Commons Library).
- Rising service charges: Leasehold properties face steep increases, service charges rose ~11 % in 2024, while building insurance jumped ~92 %; professional and utilities fees rose 69 % and 73 % respectively (Wikipedia). Nearly 60 % of leaseholders report being unable to sell due to onerous clauses or bills (The Times).
Pros & Cons: For Homeowners and Investors
Leasehold ✔ Lower entry price for flats, especially central London; more affordable than comparable houses. ✔ Flexibility for short-term investors, lease extensions and capital gain potential if the lease has sufficient length. ✔ Reform tailwinds, removal of ownership delay, easier lease extensions, stronger protections around service charges and management rights (Wikipedia, GOV.UK).
✘ Shrinking value over time, leases with under 80 years left are significantly cheaper (on average £95,000 less), but expensive to extend (The Times, NO5 London Property Professionals). ✘ Risk of runaway bills, service charges and maintenance, insurance costs often opaque or uncontrollable. ✘ Mortgage and resale risk, lenders wary of short leases or onerous ground rent; buyers may struggle to exit (Financial Times, The Times).
Freehold ✔ True ownership, no diminishing lease term, ground rent or service charge obligations. Greater control and lower long-term uncertainty. ✔ Attractive to many buyers, especially among houses and conversions in outer boroughs. Capital values rising faster on houses than flats (houses up ~31 % over 5 years vs flats ~30 % in 10 years) (The Times). ✘ Higher entry cost, especially in central London freehold houses. ✘ Estate charges / “fleecehold” traps, some new-build freeholds still require paying estate service fees, without consumer protections (Wikipedia).
What It Means in 2025
For central London flats, leasehold still dominates but only if buyers check lease length, service charge structure, and extension liabilities. This is particularly important for overseas buyers London property, where distance makes oversight harder but professional management can offset risks.
For houses and maisonettes, especially in outer boroughs or suburbs, freehold is increasingly preferred, longer-term stability, rising capital values, and fewer hidden costs. For those planning to invest in London property from abroad, freehold options may provide more peace of mind compared to leasehold complexities. As reforms roll out through 2025 and beyond, commonhold may become the norm for new developments, offering clarity and security for both domestic and international investors.
Tips for Buyers & Investors
- Due diligence is non-negotiable: check remaining lease term, ground rent schedule, service charge history, and freeholder reputation.
- Factor in extension costs: leases under 80 years incur significant “marriage value” premium unless reforms change valuation rules.
- Watch the reform timeline: major provisions may not come into full force until after 2025, and legal challenges from freeholders could delay implementation further (The Times, Beverley Morris, Wikipedia).
- Seek legal and property advice: especially navigating Right-to-Manage, enfranchisement, or transitioning to commonhold.
Conclusion
In 2025’s evolving London property market, freehold offers long-term certainty and fewer surprise, especially on houses, while leasehold remains viable for flats, but only with caution and deep due diligence.
For those considering London property investment for international investors, the landscape is changing quickly: freehold provides stability, while leasehold reforms create new opportunities if carefully managed. With commonhold on the horizon and rising service charges in play, the best strategy is to align tenure choice with both investment goals and long-term lifestyle needs.
