Shared ownership in SE London (Lewisham)...is it worth it?

[TurquoiseDress]

Me and the OH live in a rented 1 bed flat in Southwark borough with our LO who is nearly 2.

We were looking at the Lewisham area over the summer (as well as Catford & Beckenham) as we have friends living there.
It looks like a decent place with potential and excellent transport links.

Got the Evening Standard newspaper tonight- there's an article on Lewisham & first time buyers & more specifically on shared ownership.

My question is- is shared ownership worth it? I'm sorry if this has been done to death on here.

Here's an example from the paper:
Thurston point development
£88,750 for a 25% share of a 1 bed flat- full market value £355,000

£121,250 for 25% share of a 2 bed flat- full price £485,000

The article doesn't mention the remaining 75% but I gather you pay rent on that portion.

Priority will be given to those already living in the Lewisham borough.

Is this something worth pursuing?
Between us our annual income is around £70k

We have about £10k deposit so far but it's so hard to save with paying a hefty rent each month >£1k

How will it work when we come to sell? How much of the price increase do we benefit from (if indeed prices go up)?
How is the rental portion calculated?

We're looking to have another baby in the next year or so- yes I know we should get the home sorted first but I'm 38 and time is ticking!

Ideally we'd like to buy non-shared ownership but it's looking v unlikely in SE London...I'm staring to think shared ownership is the only way it's going to happen!

I know the idea is of the property ladder is we move up into a bigger place in a few year, but is this realistic with SO?

Ideally we'd like a 3-bed semi/terrace/maisonette but that is never going to happen!

Any thoughts or experiences to share? I am fully prepared to be told that we are living in dreamland!

Hi - I used to live in SE London and have friends who have done the SO thing, so I will try and answer some of your questions, but I am by no means an expert.

Is it a good investment/ good idea?
Put it this way, it's better than renting. Renting in London is absolutely brutal and it will only be grimmer once your children are in school. In the long-term, you are not going to lose money by buying in that area, it is regeneration central and the bakerloo line extension will raise prices too.

Is it the area you want to live long-term? We moved away because I didn't like living in London. It was fine while DD was small but I couldn't face the idea of two children and v little outside space (presume this is a flat you're looking at) and also the noise, dirt, grime and general hard work of living in a somewhat deprived bit of London (I lived in Sydenham).

In respect of a property 'ladder', I think the only way to achieve that these days is to move to a cheaper area (which we did) or count on your income increasing massively or an inheritance - are those likely scenarios? Second stepper houses are in very short supply too, so the price difference between a flat and an average house in the same area can be vast. If you think you might move in the next few years, will it be worth the hassle and costs (stamp duty, solicitors might run to £10k or so on this purchase, and maybe more on your next)?

Yes, you will pay rent on the remainder. You would have to contact the association for more details of that as I guess they all do it differently. I'd be especially interested how they calculate/levy rent increases for example.

Same goes for selling. When my friend sold his flat, the housing association (it was a key worker scheme) had a waiting list of people he had to offer his owned share to first before he could go on the open market. I think an independent surveyor was brought in to value it, but I might be wrong. He sold it this way, because of course, there was a waiting list. He had to use a specialist solicitor who was used to dealing with this kind of sale, but it didn't seem to be any more hassle than any other property transaction.

Hi
Thank you so much for your very detailed reply- much appreciated!

I mainly know 'friend of a friend' or acquaintances who have bought via SO very recently. So I don't have any information regarding what happens when you go on to sell.

What scares me is trying to sell and finding ourselves being stuck in a 2 and wanting more space.
Not sure if the scheme has 3 bed flats.

We are London based, our jobs are here & my family are within greater London. We really don't see ourselves moving out beyond the M25 or further, doing a big commute into London.

The only thing that really stops us is that OH owns a small property up in Yorkshire. He's planning to put it on the market next year & hopefully sell it fairly quickly.
However, outside London is such a different environment- we are looking at making maybe £15k profit if we're lucky.

I think these schemes are only open to first time buyers- so we would not qualify until the property is sold.

The other thing that worries is having no stability for the LO- school is not for another couple of years but we really want to get our own home sorted so we don't have the dreaded prospect of being given 2 months notice to vacate our home.

This has not happened to us yet (touch wood) but moving with a small child (as opposed to flexible childless couple) is going to be very hard work!

Ok that's lots of food for thought.
I just wonder what the rules are for the rental amount? How much could it increase each year? Etc

Thank you again for your reply

Hi,

I'm in a shared ownership property at the moment (SE London) and it's worked out really well for us.

We had enough deposit for this but not enough for a house so went with the shared ownership although we had no plans to buy the whole thing. We brought a 2 bed flat as a resale (not new build as you pay a premium for having a new house) in woolwich and have see the price increase by £100k since we brought it.
I think the pp is right that it's far and away better than renting because you have the chance to have a share of the increased equity.

We do pay rent on the portion we don't own which is below market rate to allow you to save to increase the share. As this is a flat the one stinger is that the service charge is about £150 per month! On a shared ownership house it would be less.

We have had a baby and at the beginning of the year were making long term plans for housing. As property prices in our area looked like they would continue to rise we decided to try and buy more shares in the flat, although our deposit had already been substantially increased due to the rise in value, even at a 30% share.

Before we were finished with that however the housing association offered us a place on a pilot program with them to buy another house on the open maret and buy a share of it.

With the increase our share from the flat we can now afford to buy a 70% share in a 3 bed house in a less nice area. However if this hasn't come up we could have brought a smaller starter house in a less nice area or more shares in our flat. The increase in equity allowed this.

The selling process is as the pp described and I found the valuation and selling price for our flat, as set by a surveyor to be an accurate representation of the market. We also had 10+ offers to buy after the first and only viewing.

In summary yes i think it is much better than renting as allows your deposit to grow in London instead of throwing rent down the drain.

My top tips are:
1- try to buy a resale property if possible as these are much more reasonably priced I.e no premium for a new home

2- try and buy a house or maisonette if you can to avoid huge service charges on flats.

3- if this is a stepping stone to another property, buy in the best possible location you can or the one with the best prospects for growth. I can recommend woolwich if you are looking a little further south. Excellent transport links, forthcoming crossrail, lots of high quality development. I think our flat would probably have increased by another £150k before the crossrail arrived but we really wanted a house with garden!

Hope that helps! Sorry if it's a bit rambling, have had a rather nice glass of wine!

I was offered a new build SO flat in Wandsworth about 3 years ago with river views, Battersea Park down the road and Chelsea across the river.

I turned it down and to this day regret doing so. You can live in much better areas with shared ownership (I live in a down-at-heel area now and will never again get the chance to live in such a great location, at least not in London, unless I win the lottery).

A colleague at work has a friend who started off in SO and "did very well out of it".

Good luck, whatever you decide, but personally, I would go for it - as a PP said, it's better than renting.

Hi Tom and Stargirl
Thanks so much for your replies...they've given me some hope!

It's also motivating me to really look into SO options and really make plans to do it next year.

Do you have any websites you could recommend? There seems to be an awful lot of newbuild SO, I kind of presumed you couldn't buy a non-newbuild property?
Or is that 'help to buy'...? Bit confused!

My husband will definitely have to sell his place up north, it's doing well with rental but we really need all the cash we can get!
And yes service charge & ground rent all do add up. To be honest, buying a flat would be against my better judgement, but I think it's all we can afford!

I think all these kind of schemes are only for first time buyers.

Off to finish my ??

My wine!

Look on sharetobuy and search for resales using the filter.

Hi Turquoise, we are also looking at SO, thanks to pp whose advice has been helpful.

Your DH will have to sell his property first - will that give you more deposit?

You'll be required to buy as big a share as you are deemed to afford, so on a salary of £70k you will probably buy a share of more than 25%. The affordability logarithm used by mortgage advisers takes into account the cost of rent as well as mortgage.

Each HA uses a panel of mortgage advisers who specialise in SO. You don't have to accept the one they want you to use though.

Check individual HA websites as well as Share to Buy as there are often resales or coming soon info that isn't on STB. Register for their updates on anything you find interesting, follow them on Twitter/FB etc.

We've visited the STB event which has been helpful, including the opportunity to meet mortgage advisers. The next one will be in the Spring.

Help to Buy is a separate scheme where you buy outright but with government help for the deposit. You have to be able to afford the mortgage though.

The other thing is if you are looking at new build developments, they can be very delayed, I've seen very few that are ready when they say they will be. But when they are ready, you need to have all your stuff ready and move fast.

Hi MsJuniper
Thanks for your info, sounds like you've researched SO quite thoroughly already.

Yes when my husband sells his property we'll hopefully make around £15k which will help with deposit. However, the markets outside of London are so vastly different.

He's had his property several years and we will be lucky if we walk away with 10/15k. By comparison in London people are looking at £100k increases.
Such is life!

Have you done much of a comparison between SO and Help to Buy?

Just somehow lost the next post!

In a nutshell, looking at a development in Greenwich.
3 bed flat
£580k (!!!)
Minimum share is 30% so a 10% deposit is around £18k
The thing that puts me off is the service charge- £200/month!
Is this 'normal' for London?

The rent is around £500, mortgage payments around £900/month

It all adds up to a large amount each month...but I guess it's better than renting.

Those prices seem really inflated. My husband sold his 2 bed in Lewisham for 210k only a couple of years ago. Even taking London price inflation into account, those flats seem very expensive for the area.

I think it's partly because they are newbuild that adds a premium to the price.

Not entirely sure why- of course, new is great, but generally newbuild flats tend to have tiny rooms/dimensions.

Unless you're looking at the luxury million pound ones!

It's interesting with this Greenwich development- think it's called 'Meridian Quay'

Website was saying there are only 3 bed flats left now...at those prices I don't think you need to wonder why.

Also, they are specifically targeted at families- joint applicants with children are eligible. I think to keep out the buy to let investors.

But then I'm surprised there are any left in the Greenwich developments, not far from the Waitrose I think

£200 a month service charges are pretty standard if the site has lifts, electric gates (roller shutters) or any staff.

If you are looking at a flat, to keep the costs down you should try and avoid those three things - they're what make service charges expensive!

It seems so perverse that you can't afford to buy other than through SO yet you're being directed to a development in which you're paying a MASSIVE premium for high-end F&F, being near the river, waitrose round the corner etc. I know the area really well and it is lovely, but I'm not sure you'd be getting value for money tbh.

Yes Greenwich does seem lovely, but I only know it from a 'tourist' perspective eg visiting the parks, Cutty Sark, going to all the small shops & markets.

What's it like to live there day to day? I imagine it's very busy with lots of tourists, I've seen a few times that the traffic can be horrendous.

Yes- I know the London property market has gone totally crazy but even so, I think the flats seem overpriced.

Would really love to actually get inside one- but i don't think that's possible until you've been screened & accepted by whoever runs the SO scheme.

Once we have a look we'll know pretty quickly whether it's something to pursue or not!

Service charge does seem huge down here in London.
For comparison, property on Yorkshire has a service charge of about £300/year and ground rent about £50/year.
A different world indeed!!

Greenwich is lovely. We're the other side of the park so it's less touristy, but even the touristy bit only gets really busy at weekends. The traffic on Trafalgar Road does get absolutely hellish at times. That development looks fab from the outside but it's in a bit of a weird area - surrounded by quite industrial stuff. It's kind of gritty, but not in an unpleasant way. But you're close to the nice bit so I doubt that would be a problem. I'd live there like a shot, but I do think the prices are excessive.

Haven't posted on here for a while. Have done quite a bit of researching into SO.

Like anything else it seems to have its plus points and negatives.

Those flats in Greenwich seem lovely but not got close to seeing them properly.

They are doing the next round of selling the remaining 3 bedroom flats in the development this week.
We are not eligibile yet as OH has to sell his property and out deposit isn't quite there.

You have to be accepted by the housing association/whoever is organising to stand a chance of buying.

I don't know- £580k for a 3 bed flat...reading about 'staircasing' it doesn't seem that straight forward, and what if the property goes up in value so quickly, your savings cannot keep pace to raise a 'deposit' to buy more share.

The other bit I'm not sure about is being responsible for all the repairs & maintenance....yet paying a mortgage & rent.
Although a new build shouldn't, in theory, have so many issues/repairs.
(Says she the naive one!)

If you have a bit of time to look around you before your DH's house sells, waiting for a resale SO property, preferably a house as an earlier poster said, would probably save you a LOT of money.

The problem with service fees is not only that they're high but that they often increase above inflation year on year without you having any say.