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Shared ownership resale good value?

40 replies

Yogipineapple123 · 18/12/2022 20:46

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!?

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Yogipineapple123 · 16/01/2023 18:17

Thank you. That is really interesting advice. I hadn’t thought of it this way.

I definitely see it as a stepping stone. Currently trying to get my head around how much equity I could build up. How long do you plan to stay in your place and what sort of thing do you think you could afford on the open market after?

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RedToothBrush · 16/01/2023 22:49

We had shared ownership. It worked for us, but I don't think it's ideal. Some of our neighbours on the same scheme didn't have the same experience as their circumstances were different and it ultimately caused issues.

I think it works in certain circumstances but not all. We have our doubts about whether it works in a market where housing prices are declining for various reasons. If you end up in negative equity you can get stuck much more than if you own the property outright - precisely because you can't rent it out. It limits your alternative options. I would strongly encourage having a decent deposit to at least insulate against this - and enable you to sell for a small loss if you absolutely needed to.

Be aware of any additional fees due (service charge, leasehold charge, rent) and more crucially if they do, how the increase is calculated. There have been numerous cases where horror stories have been well publicised.

My biggest piece of advice: Every scheme is different; it's a minefield. For this reason get a solicitor with experience with shared ownership. Don't just go for the cheapest option.
It's worth the investment. Understand property the terms and conditions for what you are buying - if you don't you could leave yourself potentially exposed financially further down the line. Equally be open minded going into it, and be prepared to walk if there's some sort of dubious clause / doubt in your mind.

I personally think they work better for people planning to stay somewhere for a good number of years rather than just a couple of years (we had ours for over 12 years). This means thinking about whether / when you want children/ more children. And looking at how likely a relocation might be (related to job security) OR for people where renting is the only other likely option and want housing security.

I don't think it's such a good bet for people who think they are likely to get another house in the next 5 years if I'm honest.

I think that shared ownership has it's place. It's flawed though and some people end up in a difficult position. I've heard of a few people caught out for various reasons.

And yes it's a fixed price sale - no haggling. This creates its own issues too if you come to sell on. Housing Associations are extremely reluctant to reduce an asking price once a house has been valued. So if you do want to sell on, you don't necessarily want the highest valuation possible because that might mean you end up over pricing yourself out of the market. Trying to persuade a HA to do a revaluation once an initial sale price has been agreed by you and them isn't easy. I've heard of one friend of a friend who were stuck for 4 years because of this, before the HA eventually agreed to drop the price.

Dealing with HAs isn't necessarily easy generally. I have to say ours ranks as one of the worst institutions I've ever had to deal with. Truly beyond useless. I was very glad of the day I knew we'd never have to deal with them again.

Shared ownership was ultimately the right thing for us as I say, but I do strongly caveat that too.

runningoutoftimeornot · 17/01/2023 12:25

Yogipineapple123 · 16/01/2023 18:17

Thank you. That is really interesting advice. I hadn’t thought of it this way.

I definitely see it as a stepping stone. Currently trying to get my head around how much equity I could build up. How long do you plan to stay in your place and what sort of thing do you think you could afford on the open market after?

I hope to have a family so I guess that I'll plan on moving if that happens.. I have 4 years left on my 5 year fixed term mortgage (so thankful I took this at the time, rather than 2-3 years, given now things are!) so realistically I'm thinking at least 3-4 years more.. but it all depends on my personal/life situation. I do not really foresee being here for longer than 10 years though, unless my life works out very differently than I hope..!

I could afford to buy a similar property, or a better one probably outside of London, but this suits me now to be very central. Tbh I didnt view shared ownership as a big deal in the sense of wanting to get on the housing ladder (I had previously owned a house with an ex) but it was most just a way to enable me to get a better property to live in than I could afford to rent! Even if I don't make any money, I'll be happy enough with the situation..

I would ideally only plan on selling if I am with a partner and we could buy somewhere bigger/better together in the future.

Also, re the PP's comment about house prices declining, this is not the case in a lot of London, and definitely where I am so I am fairly confident I will end up making a profit.. in fact this leads into my concern about not wanting to buy a bigger share as the property prices seem to keep going up and if someone has to replace my share, I don't want it to be unaffordable for them!

starpatch · 17/01/2023 19:43

To be honest I am not sure that is a problem though, as if you have a bigger share which you then can't sell as a share the HA will then let you sell it on the open market at full price. You staircase at the same time as the sale goes through and you share the profit with the housing association- so you might actually end up making more money that way. It could potentially take a bit longer though, the time period you have to try and sell it as a share varies from HA to HA I believe as I was with southern housing and it wasn't that long - about 2 months I think.

runningoutoftimeornot · 17/01/2023 20:42

starpatch · 17/01/2023 19:43

To be honest I am not sure that is a problem though, as if you have a bigger share which you then can't sell as a share the HA will then let you sell it on the open market at full price. You staircase at the same time as the sale goes through and you share the profit with the housing association- so you might actually end up making more money that way. It could potentially take a bit longer though, the time period you have to try and sell it as a share varies from HA to HA I believe as I was with southern housing and it wasn't that long - about 2 months I think.

Yes but then the full price flat might not be as appealing to people on the open market when they know its a housing association management company/all the other flats are shared ownership and they could just go anywhere else to buy full market value. I'm not saying it's definitely an issue but anything that limits your potential purchaser pool is best avoided in my opinion so I would try to keep your options open and have shared ownership purchasers or full price purchasers looking at your property.

Yogipineapple123 · 18/01/2023 07:49

Thanks all. I’ve seen a flat that only has 80 years left on the lease, meaning the extension fee is £25,000. Will the HA have already priced this into the valuation?

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runningoutoftimeornot · 18/01/2023 08:30

Yogipineapple123 · 18/01/2023 07:49

Thanks all. I’ve seen a flat that only has 80 years left on the lease, meaning the extension fee is £25,000. Will the HA have already priced this into the valuation?

I wouldn't bother with that one. The hassle of sorting out a lease extension with a housing association (who can be a bit slow/rubbish as prioritising things and progressing them) probably isn't worth it.. You can only extend once you've been an owner for 2 years, unless the person before has already started the extension process and transfers it over to you...but then I often wonder why they don't jsut fully deal with the extension before selling it!? Clearly because it takes ages/lots of hassle etc..!

I think if they've mentioned the extension price being £25k then that's separate to the valuation price of the share which they've presumably also already given you?

Yogipineapple123 · 18/01/2023 14:06

Thank you. Maybe the HA being slow is the reason it hasn’t been sorted as it boggled my mind that the current owner (who has been there 6 years) hasn’t done it…

They didn’t tell me the cost for extending the lease - I looked it up after I noticed that it only had 80 years left.

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RedToothBrush · 18/01/2023 17:05

Yogipineapple123 · 18/01/2023 07:49

Thanks all. I’ve seen a flat that only has 80 years left on the lease, meaning the extension fee is £25,000. Will the HA have already priced this into the valuation?

Hmm probably not. And it sounds like a ton of legal hassle involving irregular issues for the HA to deal with. Anything out the ordinary and they go into meltdown. Every dealing we ever had with ours was either slow, just done done incorrectly or they are deliberately surly about being asked to do their actual job as if you were an inconvenient but of shit they got on their shoe.

Avoid.

Yogipineapple123 · 21/01/2023 16:04

Hi helpful people again.

Those in shared ownership, what % has your rent gone up each year?

I am assuming that with inflation how it is, it will go up 10% this year. Is that correct?

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RedToothBrush · 21/01/2023 18:22

Yogipineapple123 · 21/01/2023 16:04

Hi helpful people again.

Those in shared ownership, what % has your rent gone up each year?

I am assuming that with inflation how it is, it will go up 10% this year. Is that correct?

Depends on the scheme. They are different. If memory serves ours was tied to RPI which is actually running higher than 10% ATM. This is one of the main reasons we got out because our rent started off lower than our mortgage by some distance but by the time we bought the second half of the house it was more than the mortgage meaning that 100% mortgage on the house worked out cheaper than 50% mortgage and 50% rent and given our circumstances had changed it made no sense to continue (ironically our mortgage lender at the time wouldn't lend us the money even though our financials were impeccable and we could clearly afford it. Even the mortgage advisor for them said it was insane. Especially since if we had been first time buyers we'd have been approved - it WAS our first house still. It's one of the many technicalities and weird things with shared ownership that we found along the way including needing HA approval to sell the house we fully owned when we eventually moved out!)

I know the rental increases for our neighbours were something that they were finding crippling - and this is before inflation started to go sky high. I know one was forced onto an interest only mortgage as a result. It was either that or look at selling up and moving out of the area (she didn't want to do that as her daughter was at the local school and she'd not have afforded anything else nearby).

So yes, it's something I would look at closely. A new build house with minimal rent might look attractive now, but how is it going to add up in ten years time? It's not only difficult to keep but may prove difficult to sell on because of a prohibitive rent.

Yogipineapple123 · 24/01/2023 01:03

Thank you. I am going to think carefully about rent increases.

The place I’m looking at would cost me £700 per month in rent and service charge. My mortgage would be £300.

A comparable rented flat in the area would be £1200-£1600. Thoughts?

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StellaGibson2022 · 24/01/2023 01:27

In terms of rent I think it’s being capped at 7% max increase; am sure this was one of the measures for cost of living crisis.

Yogipineapple123 · 27/01/2023 14:04

Thanks for the advice for everyone on this thread!

A housing association has offered me a shared ownership resale flat!

I am now asking for a final piece of advice - what questions should I ask them before proceeding? They’ve tried to just give me the years left on the lease and are acting as if it’s normal to pay a £500 holding deposit before they tell me more.

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windmill26 · 28/01/2023 18:50

Yogipineapple123 · 27/01/2023 14:04

Thanks for the advice for everyone on this thread!

A housing association has offered me a shared ownership resale flat!

I am now asking for a final piece of advice - what questions should I ask them before proceeding? They’ve tried to just give me the years left on the lease and are acting as if it’s normal to pay a £500 holding deposit before they tell me more.

Which Housing Association? I don't think they should ask for a deposit before giving you information.

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