Shared ownership resale good value?

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Do you think shared ownership resale can be a good option to try to get on the property ladder in London?

I do not like the look of new build shared ownership properties as they seem to have a new build premium, but the resales look more reasonably priced. Am I missing something or could this finally be my chance!?

Shared ownership can be a viable option as long as you properly do your research and read through all of the associated costs. Personally I wouldn't touch it but for some it's their only option to getting on the ladder.

1. Obviously you pay rent on the portion you don't own alongside the mortgage
2. pretty much every shared ownership i've seen has some form of ground rent or service fee which can get extremely expensive
3. You are liable for 100% of maintenance costs even if you own 25%
4. Alot of places will let you staircase (buy more shares to eventually own the whole house). Check this as quite a few have a clause where you can only staircase to 80%. Also buying new shares is based on the CURRENT value. Say you own 50%. At the time of purchase the whole house is worth 200,000. Your mortgage + Deposit is £100,000. Wait five years. The house is now worth £250,000. Any shares you buy will be based on the value of £250,000 (so you now need a 150k mortgage for the rest instead of 100K)..This makes it difficult for people to buy more as the house prices raise faster than their wage and affordability.

Good advice from @Wishingforwinter

My first property was a shared ownership (not London, and many years ago).
I had no problems at all reselling it, and it was a great way to get onto the property ladder with limited outlay and means. If you are having to pay rent anyway it makes sense to have a stake in the place and benefit from its appreciation, as well as the much greater security of part ownership over rental.

A few things to look out for and think about…
A good location is particularly important for shared ownership when it comes to selling. Also beware of any construction or clauses that might prove difficult to secure a mortgage on in future.

As previously mentioned - costs. These have become more complex (sneaky) over time in some cases, so undertake detailed research.. are there circumstances when, if you miss a payment you could be evicted and forfeit your share? How are costs such as rent calculated and is there any independent appeal? This is particularly pertinent if it’s linked to unknown factors such as inflation, plus a set percentage.

Many shared ownerships are now leasehold (even the houses), which adds a layer of complexity, and greater costs.

As also mentioned, buying a greater share over time will be based on prevailing market value. However, if you’re viewing Shared ownership as a stepping stone to full ownership you’ll have the option to sell when finances improve and your stake will
still be keeping pace with property prices. Putting your investment into a savings account is unlikely to do so (unless prices stagnate or fall).

I just sold my shared-ownership flat in East London and made a decent profit on it.

I would say it might be a better option to go for a shared-ownership house resale if you can. Less likely to be issues with things like ground rent, high service charge and also cladding and remediation costs that are affecting a lot of new-built buildings in London.

Thanks for the advice all. Sadly I think a house would be out of reach!

I am looking at two bedroom flats so that I could rent out the second room to a friend (which I imagine will be banned in some places - but I have a £50k deposit so more than the minimum.) .

I want to buy at least 50% so that I am paying more towards a mortgage than rent. I am hoping I will have another two to three years to grow my income and deposit.

I pay £1000 per month in rent at the moment. I love my flat but if the landlord increases the rent or I have to leave, I think I will try to buy.

Have you already applied to the Housing Associations in your area? Buying a shared ownership property is not as straightforward as buying a regular property. You have a good deposit,I would start the process now as it can take a few months (if you are lucky) to a few years if your application for properties keeps getting rejected .Priority will generally go to a family over a single person (especially for a 2 bedroom apartment). I wouldn't wait until you reach the 50% share mark,get in as soon as possible especially as you are wasting money on rent. You can have a lodger, renting it out is where the Housing Associations are not keen (for obvious reasons). Get yourself over the Share to Buy website and have a good read www.sharetobuy.com/shared-ownership-london/

Basically yes resales are generally much better value.

Yes better value as buying second-hand always is. I think the ballpark is that buying new builds is a 10% premium.

We're just in the process of selling our shared ownership property but it's a three bed period terrace which is very rare. We will have made about £70k on it (bought eight years ago) and are very lucky that the housing association are letting us put it on the open market as a freehold non SO property so it sold very quickly.

I didn’t realise I needed to apply to housing associations - does anyone have more info on this? I will also have a good read of the share to buy website.

I am very interested to hear views and experiences of anyone who has bought shared ownership.

Check your council website they should have all the info plus the application form under Housing/Home Ownership. I am not sure if all the councils have the same procedure but it shouldn't be difficult to find out.

It seems to be different in London. I have registered to Homes for Londoners and three different housing associations.

Waiting to hear back regarding my applications but somewhat dismayed to see that they say my rent + mortgage shouldn’t exceed 45% of my income or I may struggle with affordability checks (?!). Highly doubt I’ll be accepted due to this.

Yet another frankly insulting barrier to home ownership. My rent is currently 50% of my income. On top of this, I save about 10% of my income. I CAN afford this but obviously one of the reasons I want to get on the ladder is to reduce the overall % I’m spending.

Whoever sets these affordability requirements lives in a rich person lala land. I am dismayed that it’s considered ok for me to go on living like this… but apparently it’s too risky for a huge bank to be able to lend me money that will allow me to improve my situation.

I am in shared ownership as it was the only way to get a house. It's a bit annoying when the housing association put the rent up but other than that it's been okay and I much prefer the stability of knowing we don't have to leave and no landlords to answer to.

If we were to sell I think the housing association would have to put it on the market for us but that's ok. We have still made a profit which we would not have done if we were still renting. It was also resale to but looked brand new (doesn't now haha)

*too

I can be wrong ,but I think that in the affordability calculation they will take into consideration the fact you will have a lodger . You need to speak to a mortgage advisor that deals with shared ownership to understand how much you can realistically borrow.Barclays and Nationwide lend on Shared ownership,give them a call. If you can't stretch to a 2 bedroom I would consider a 1 bed apartment if I was you. Anything to stop paying someone else's mortgage.

Thanks for all the advice! I’ll give a bank or broker a call in the new year. Fingers crossed they take into account money from the lodger. If they are strict about the 45% 1 beds may be out of reach for me too.

Just a point on number 4 in this reply you received. If the housing association has a multi lease, meaning one lease for all of their units in the building you can only ever own 100% of the sub under lease, you will never become an outright leaseholder.

Another thing,buying a shared ownership property has to be used as a step in stone to be on the property ladder instead of paying rent to a private landlord. With the current property prices it is difficult to staircase to 100% ownership but a lot of people manage to make a profit when they sell their share and use it as a deposit for an open market property.

In my case I did end up having some regrets that I didn't look further out in London to the outer zones where I could have perhaps bought something outright. I don't see many down sides to shared ownership but do look around and consider if you could buy outright somewhere else and if its a compromise you are prepared to make.

We bought a shared ownership resale flat in the summer - 2 bed flat in a 7 year old block so fairly new in the grand scheme of things. It took us from Jan - June for the whole process to complete and the affordability was quite tight but we made it. Best thing we’ve ever done - even with paying rent and mortgage (40% share), it still works out about £400 cheaper per month than if we were renting a similar 2 bed flat. I’d recommend it any day of the week. We were lucky to get a 5 year fixed mortgage so we plan on staying here until then and paying as much of the mortgage off that we can then moving to a house with the equity - we’d never have been able to get on the property ladder otherwise!

Buying an SO resale very well for my partner. He staircased to 50% then sold for profit. His 'rent' portion was also very affordable - something like £400 a month in central London.

Glad to hear the positive stories!

Thanks to all those on this thread for help. I’ve started viewing flats!

With shared ownership resale, am I allowed to offer below the asking price?

Also, does anyone know if one month’s unpaid leave will harm my application? I wasn’t paid this December as I took time out to travel. I have been in the job for 2 years and very stable other than that. Overall, I earned more than my salary this year due to a large amount of overtime for the rest of the year.

I'm not sure. When we bought ours we had to pay the full asking price as it was priced on market value, rather than pricing it higher and expecting offers around or under that. My housing association was keen to ensure the property was affordable and was priced accordingly.

When we sold the buyers could only offer the asking price which was a shame because at the time houses were selling for above asking.

m the downside for us was that the housing association had to have 6 months to sell using the buyers in the waiting list before we could put it in the open market. It didn’t sell in 6 months. We didn’t even have one viewing. We put it on the open market with options to buy outright at x price or to buy 50% at y price.
once it was on the open market they didn’t have to be pre approved by the housing association. We could sell to anyone.

the other downside was low quality installations like a very budget kitchen and bathroom on moving in. And fairly shoddy workmanship. That took a lot of effort and fighting to have corrected.

Just to add my experience, I bought a 2 bed resale shared ownership property around a year ago in London. I had to give the price the share was advertised for - no offers. Also, there were fairly strict rules about renting out the flat - I think perhaps a lodger is ok but you need to check with the solicitor etc if it goes that far. I know I cannot rent the flat out entirely so if I were to move in with a partner etc that would be an issue - they'd have to move in here!

I wouldn't have bought a shared ownership property outside of London as I think you limited the resale pool - if more people can afford to purchase a normal property then why would then purchase your flat. Whereas in London, there'll be masses of people keen to get a decent flat for a fraction of renting (yes, even when I consider my mortgage and rent and service charge, I am saving at least £800 compared to renting a comparable flat - I simply couldn't afford to rent a comparable flat!

One thing I would say, is I agree with other posters who said that you should really view it as a stepping stone to purchasing a normal property in due course.
I would caution against purchasing higher than the minimum share, because this means that any future purchaser of your flat has to then purchase that SAME share. When you consider the fact that in order to be eligible for shared ownership, you have to have a decent deposit but be able to afford the mortgage/rent/bills etc BUT also not earn over x amount (I think for a single person it was £90,000 and for a couple it was, strangely, £80k each) then you are only looking at a certain pool of people. Best not to rule out the people who could afford to replace your, say, 25% share but they can't afford to purchase your 50% share because you've staircased up to 50%. I think there is a person in my building having this issue - they have purchased 35 or 40% I believe and it's been listed for months and isn't selling. But other 1 or 2 beds I have seen over the years with 25% share (mine included when I purchased it) have flown like hot cakes. I'd use any extra money to pay down your mortgage so you have more equity when you sell.