Shared ownership as an option for the ‘squeezed middle’

[lousong]

We’re in our 20s trying to start out
For some reason shared ownership works out as cheaper than buying on the open market but we’ve been warned against it because of the fact you’d be buying a leasehold property
Our wages are likely to go up in the future but not anytime soon. Some lovely shared ownership 3 bedroom houses have come up locally. The area is convenient, family orientated and safe, and house prices are rising in this area quite fast (so would likely gain equity). We are going to struggle to purchase outright - we would meet repayments but it would be very tight and to the limit of the stress test. We would be paying about 500-550 mortgage a month and 250 rent. Could it be worth it to gain equity? It’s unlikely to be a house we could stay in forever, but a place for the next 5-10 years. We have secure employment but I am trying to think for the future in terms of taking maternity leave possibly in the future and dealing with reduced income, we wouldn’t be able to pause an 100% mortgage but we could potentially get help with the rent element of a shared ownership.

YABU - avoid
YANBU - worth it

That's great if you live in an area that'll allow this! 😀

However in our area, 2 good incomes can only buy you a mouldy 2 bed mid terrace with no garden or parking.

Whereas shared ownership can give you 3 double bedrooms, a garden and a double driveway. In a safe area.

I get what you're saying but if you read a few books you'll realise that the UK housing market wasn't created equally 😉

@YaWeeFurryBastard it definitely isn't aimed at lower earners in areas of high demand like the south east or south west - you often need£60k plus earnings to fit the affordability stress test.

I wouldn't say that is low earners.

You may want to read these:

https://nearlylegal.co.uk/2023/05/shared-ownership-and-right-to-manage/

and

https://www.sharedownershipresources.org/campaigning/reports/consumer-perspective/

I bought my shared ownership in 2020 it got delayed as I had put down a reservation fee in Feb then lockdown happened and could not move in until August. This was also due to the no inspectors available to issue the cladding certificate needed for the bank to go ahead and ok it. I got the cladding signed off ( which I understand is an issue if you want to sell and don’t have one).

My mortgage is low and my rent has increased by £50 a month since 2020 and is been very gradual with an annual increase every April since 2020.
pros: I have a balcony - building is maintained - they refunded me overpaid service charges- I pay £25 for heat and hot water every month as my flat is incredibly warm even in winter -heating not on until December - £24 a month for a fixed electricity and I have a big amount of credit I have built up according to British Gas. My bills are low and have been low for the last three years.
I live 3 min walk away from an Elizabeth line service and it takes me 15 min to get into central London. I also work a 35 min walk from job.

I get this is due to the size of my flat and area is not totally rough but not totally trendy either. However I think it’s an incredibly large size for a one bed flat.

2 massive parks nearby. Lots of shops and amenities a 2 min walk away.

cons: I am aware that owing a full flat mortgage would be better however this suits me for the next 5 years. I also think I would sell it quickly if I needed to as the area is popular as it’s low cost and there is a demand even for shared ownership in my area.

I only had to pay for two repairs in last 3 years - washing machine door and oven.

Any other repairs like my door not locking properly was fixed by management as it was on a communal hallway so was considered their responsibility.

They also check my boiler every year at no cost to me.

I would buy a house absolutely, especially if I knew I was going to live in it mid to long term.

I would not buy a flat in a town/city - my friend is trapped in a shoebox in outer London and she cannot sell it and is desperate to relocate.

Same - if it was a simple choice between renting or SO I would choose SO.

But also I would be prepared for the value of the property to likely fall in the short term (first few years) as new builds do tend to, quite apart from the fact that SO properties can be harder to sell.

I would still do it for the security over renting, though.

It would make better financial sense to buy the mouldy 2 bed mid terrace as you will own all of it and won't have to share any profit plus the Victorian terraces are more likely to appreciate in value than new builds.

But I think what you mean is, you would prefer a 3 double bedroom new build with other advantages. That is ok if it makes you happier as long as people understand who make that choice that it is not the best investment wise, in most cases anyway.

It has its downside but upsides too- and a biggie is it can give some security. Works well for many divorcees too on lower incomes but big deposits who couldn't get a large mortgage or older people who have cash but can't get mortgages but want security . Not everyone is obsessed whether it's a great investment- they just want more security of tenure. Many would be quite happy with a good quality HA fkat or council house but as they are in humongously short supply - especially if you are working and have a decent income then at least this is an option. Many poo pooing it probably live (like one of my sons) were you can still get a 3 bed semi with a good garden for £185k. Not everyone has those options for varying reasons or is happy to live somewhere they know no one or opportunities are low.

@Twiglets1 You couldn't be more wrong. Bless you for thinking you understand the enterity of the UK housing market 😊

No, very bad idea. Easy to get trapped as your circs change as HAs are useless at helping find a buyer at the percentage you hold (you have to sell the same percentage you hold, so no value in staircasing up to say 60 per cent etc)
Only worth it if you can likely afford to staircase up to 100 per cent within 10 years.

@YukoandHiro we sold our 50% a good few yearsago in 3 days. My only provision would be to do it in areas of relatively high prices/high demand - large population centres

It worked well for me and my husband. We bought ours in 2018 at 50% and by 2022 we had enough equity to staircase up to 100%. We won't be here forever but have just had an extension built and the garden redone, so are happy enough to stay for a while yet.

You’ve essentially confirmed what I said? Shared ownership provides more luxury housing than what people can typically afford.

Bought a shared ownership house in our 20s. Lived there for four years with no issues. Sold really quickly and the equity enabled us to buy normally. No regrets.

You actually confirmed what @KingOfThieves said without seeming to even realise you were doing it & are now trying to patronise me?
I never claimed to understand the whole of the housing market but Shared Ownership is not a good deal for most people, in my opinion. And I did do a LOT of research into the pros & cons last year when my daughter was buying her first flat.
I know it will suit some people but they shouldn’t go into it without understanding all the disadvantages as well as the advantages of a glossy new build. Many people have listed the disadvantages on this thread, for anyone that actually wants to understand the issues associated with SO.

There's some misinformation on here based on older properties - if you're buying a new property under the new model of s/o you don't have to wait more than a couple of week for the HA to find u a buyer. if they can you can go straight to sell on the open market.

General Repairs are also now covered for 10 years which is on top of the 10 year NHBC type warranty. (unless you have purposefully damaged something)

you can stair case 1% at a time if you wish, with cash, without paying large legal fees to make it much easier to get to 100%.

Google "new shared ownership model" for all the details but in all, it really makes it a much more attractive way to buy than before.

Thanks! This is exactly right

Shared ownership worked really well for us.

We initially bought 50% of a resale property in an area we wouldn't have been able to afford, with the intention of staircasing to 100% at some point. The pandemic came along and then the stamp duty cut happened and we were able to buy the remaining 50% a lot sooner than anticipated.

It worked well for us - there are drawbacks which have mainly been listed above so I won't repeat. The main one this year would undoubtedly have been the RPI+1% rent increase.

That’s a lot, though I suppose if your house gains in value fast then the rent isn’t wasted money as it’s just more equity in a way

I found it really difficult to think of rent as anything other than wasted money! But we were better off with 50% mortgage and 50% rent than we would have been renting on the open market, so it all worked out.

I think different housing associations have slightly different criteria for just about everything like rent increases or whether you can ever staircase to 100%. Our association dealt mainly with flats so were always surprised when I explained we didn't pay a service charge as we were in a house.

I did this. Only had to put some a small deposit. The rest was gifted by the HA. Two years later they offered us to buy other half of house and pay all our legal fees. We now own 100%. It's been perfect for us. Yea you have to pay for your own repairs etc. but you do as a home owner.

This is what we’re thinking plus we get the house size we want

We are shared ownership and it's fine, this is the only way we could ever get a house. The rent has gone up an extortionate amount over the years though but I don't know what I can do about that. I still prefer it to renting as at least I know we are paying towards something rather than nothing.

Are you in a house or flat?