Buying a shared ownership property as a first time buyer

[thesandwich]

Dc is looking at properties- and wondering about the pros and cons of shared ownership of a new build flat?
What should they consider? All views very welcome!!

Watching with interest.

Honestly? You’re not buying it, your DC is. Let them consider it.

I bought in shared ownership over 15yr ago and still in shared ownership now (moved from 50% of 2 bed 2nd floor new build flat to 40% of 3 bed detached new build house 9 years ago).

Main thing I would say is make sure it's somewhere you're prepared to stay medium term - it took us a long time to sell when we wanted to move (years).

Other than that it's the usual to all house buying, there will be a snagging list etc. Also check for any weird things you'll need to repair/maintain (for us it's a air recirculation system in the loft). I have seen a few shared ownership places with these which I have never seen in a 'normal' house! There must have been some kind of incentive once to install them!

Housing association covers buildings insurance but everything else is down to buyer eg all repairs and maintenance which sometimes feels a bit unfair when it's half theirs.

In the buying process you get offered places rather than having free choice ifswim. So need to be ready to make a decision when looking at properties so do homework on neighborhood/schools etc before viewing rather than after.

They can be more difficult to sell on because you have to sell the share you own or a larger one which limits your potential market, especially if it’s a larger share; service charges, particularly for large blocks of flats, can be eye-watering; newbuilds lose value initially, so it’s a medium to long term purchase; you are responsible for all of the repairs despite only owning a percentage of the property; your landlord will usually be a social landlord and some are better than others so do due diligence.

But if shared ownership is the only viable way for DC to get on the property ladder / away from the insecurity and restrictions of private renting then it’s a good option provided they’re aware of the potential drawbacks. Hundreds of thousands of people live in shared ownership homes and are happy with their decision. Just make sure DC has thought about it carefully and isn’t only seeing it as a way to get a brand spanking new place in a smart development when they could actually afford to consider the open market.

Could they afford an older property with 100% ownership?

I think it's a good scheme for those who can't buy but the amount you pay in rent you don't appear to save much per month it just helps with the amount borrowed.

Check if they would be able to buy 100% at a later date. Some are capped. If they can buy something less flash and new, they should do that.

Thank you! Really helpful.

We considered this when we were buying our house a few years ago. Our mortgage adviser strongly advised against it because of how difficult they are to sell on.

If they can afford to buy an older house for 100% ownership, definitely do that. You usually get more for your money with older houses too.

I have often wondered about affordability of the rent on top.

A lot has been explained already. I’d say that I’d encourage the idea if they can’t afford anything outright either because of low earnings or not having enough deposit. If they can afford sth, even a studio or a one bed, then I’d rather go with that.

As New builds are valued a lot higher than second hand flats of the same kind, I’d stick to a second hand property.

I bought a second hand one and it was a good foot in the door for property ownership. It was a 2 bedroom flat in an up and coming area of SE London, I was fortunate that when I went to sell the price had gone up a lot in 3 years and it was now in a trendy area that young people wanted to live in so was easy to shift.

I enjoyed the freedom that it was my place so I very quickly made it my place with new painting, carpets, wardrobes etc. This felt great.

Downside was dealing with the management company, but this would have been the same if I owned 100%, they managed the building and were generally shit. Seems to be a common theme amongst property management firms.

Personally I like the concept if you have the right property in the right location

Thanks- really useful 🌺