Studio flats fall out of fashion: Are these once popular starter homes now a financial millstone?

Studio flats were once considered the classic first step onto the property ladder and billed as perfect second home boltholes or buy-to-let investments in city centres.Now increasing numbers of the 357,645 studio flat owners in Britain are finding these properties are no longer worth what they paid for them.Studios have become one of the most unloved types of home on the market, according to exclusive data provided to This is Money by analytics firm PropertyData.Studio sales have nearly halved over the last decade, falling from 5,423 in 2016 to just 2,885 in 2025, analysis of Land Registry statistics shows.As a proportion of all flat sales, studios have dropped from 2.5 per cent to 1.9 per cent during that period.The average price of a studio has only risen 7 per cent in nine years – from fetching £140,000 in 2016 to £150,000 last year. Flats, more generally, rose 15 per cent during that time. In the year to May, 29.5 per cent of studio flat owners have sold at less than they bought the property for. That compares to 24.8 per cent for flat owners selling at a loss more generally. They are also proving expensive to run, given their small size and rising costs of service charges and repairs.The typical studio measures a total 28.6 square metres (307 square feet) compared to 490 square feet for the typical one bed flat.But when it comes to service charge, the typical studio owner has to fork out £1,907 a year, according to PropertyData. This works out as about 34 per cent more per square foot than with one bed flats.'Studios have gone from a smart first step to a millstone,' says David Stirling, an independent financial adviser at Mint Wealth. 'You're paying near enough the same service charge as a one-bed for a third of the space, and lenders are getting cold feet below 30 square metres, therefore the pool of people who can actually mortgage one keeps shrinking.'Hannah Vandervennin, director at The Mortgage Consultancy thinks buyers interest in studios has evaporated post pandemic while banks are also cautious to lend on such properties – particularly those on the smaller side.'Studios are being squeezed from both sides,' says Vandervennin. 'Buyer preferences have changed post-Covid, with more people valuing space, outdoor areas and less need to live right on top of London offices, while they can also be harder to finance.'Lenders can be cautious, particularly with very small studios. Around 30 square metres (323 square feet) is a common minimum. 'High service charges can create another issue. Once charges start approaching 1 per cent of the property value each year, some lenders become uncomfortable around affordability and future resaleability.'Where would you not want to be selling a studio right nowOwners trying to sell studio flats in many parts of London are having a tough time of it.The capital has seen very little house price growth over the past decade with some parts of the city now cheaper than in 2014.The price of flats more generally in the city are on average lower now than they were in 2016 meaning there are now many owners discovering their flats may be worth less than what they bought for.This is perhaps even more the case for owners of studio flats whose properties now appeal to an even smaller pool of buyers.Of all the studio flats bought in the last 20 years and sold in the 12 months to May this year in Lambeth, more than half have sold at loss, according to PropertyData.Roughly half of those selling in upmarket Westminster or Kensington and Chelsea have also sold for a loss.In Wandsworth, Croydon and Hammersmith and Fulham, roughly two in every five studio flat owners are realising a loss when they come to sell.But the losses are not limited to London. In Leeds, almost two thirds of studio flat sellers have sustained a loss in the last year.In Birmingham, two in five have done so, while in Brighton and Hove, Bournemouth, Christchurch and Poole, more than two thirds have sold at a loss. 'Leeds is the standout casualty,' says Michael Dent, director at PropertyData.'Sixty-four per cent of studio resales were at a loss and the average price change was negative, driven by city-centre investor blocks such as Bridgewater Place, West Point and CitiSpace, where flats bought in the mid-2000s or late 2010s have resold £15,000–£50,000 below the price paid.' Too small and too costly?One in ten of the 357,645 studio flats in the UK is under 16 square metres (172 sq ft). According to the analysis, some 84 per cent of studios are now smaller than the 37 square metre national space standard minimum for a new one-person flat. This is the standard that applies only to new homes – but shows most of the existing studio stock could not be built today in areas that apply the standard. Studios currently listed for sale average a slightly larger 349 sq ft (32 square metres), reflecting a more London-weighted mix, according to PropertyData.Many also come with expensive service charges attached. The average service charge on a studio for sale today is £1,907 per year compared to the £2,259 average for one-bed flats. In cash terms, studios pay considerably more for every square foot In London the average annual studio service charge is £2,442, and in Tower Hamlets, it reaches £3,495 – nearly £300 a month on a home averaging 409 square feet.Pricier examples can be found in central London. For example, a studio near Hyde Park for sale, that has been reduced from £250,000 to £200,000 currently comes with a £5,093 annual service charge despite the flat only measuring 18.7 square metres. Can studios still be a good investment?Estate agent Nicholas Austin of RiverHomes is a fan of studios, being an investor in one himself, albeit he says it depends on where you are buying.'Studio flats can actually be a terrific investment as long as you choose carefully,' says Austin. 'With studios, "location, location, location" is absolutely the case. 'My family actually owns a studio flat as an investment property in Parsons Green in London. It is in a beautiful location very close to the tube. 'Incredibly, I’m making a 9 per cent return annually. You will struggle to achieve those kinds of consistent returns with any other investment.'The key is to negotiate hard when buying and preferably buy in cash, according to Austin.Due to the lower purchase price, the stamp duty tends to be lower as well, which makes a difference whether a first-time buyer or investor.For example, a £250,000 studio in London can be bought without having to pay stamp duty at all if a first-time buyer.An investor would have to pay £15,000, but were they to buy a bigger flat for £500,000 in the capital they'd face a £40,000 bill. Austin adds: 'The other important thing is to ensure that it comes with a share of the freehold or that it has a very long lease. 'If it’s the latter, ensure that it comes with RTM or right to manage. This will keep service charges at a minimum. 'A £250,000 flat will easily let for £2,000 a month. 'This is a 9 per cent return which isn’t unusual, and studios are also popular Airbnb rentals. They easily go for £300-400 a night depending on the time of year.'However, he warns that anyone buying a studio in the hope that price will increase will likely be disappointed. 'Here is the bad news, though: studio flats are unlikely to accrue in value,' says Austin.'Demand for them as purchases – other than for investors – is low. Most first time buyers are opting to buy a two-bedroom flat or even a house outside of London as their first purchase. 'Young people rent studios; they don’t buy them. Enjoy the rental returns but just acknowledge that their capital appreciation will be minimal.'David Stirling, suggests struggling studio sellers avoid the temptation of letting out their flat and waiting for the market to turn.'If I owned a studio today, I wouldn't wait for the market to prove me wrong,' says Stirling. 'I'd run the numbers on rental yield after that service charge, and if it doesn't stack up, sell now rather than in five years' time alongside everyone else reaching the same conclusion.'Best mortgage rates and how to find them Mortgage rates have shot up again due to inflation triggered by the conflict with Iran reversing hopes that the Bank of England would cut rates. This means those remortgaging or buying a home face higher costs.That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord.This is Money's partner L&C can help you with its fee-free mortgage service.> Compare mortgage rates> Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.If you’re ready to find your next mortgage, why not use This is Money and L&C’s online Mortgage Finder? It will search 1,000s of deals from more than 90 different lenders to discover the best deal for you.> Find your best mortgage deal with This is Money and L&C Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.