Shared ownership flat in London - yay or nay? All advice welcome

[hopespringseternal18]

Am facing a rather sudden and unexpected dilemma and don't have anyone 'in the know' to ask, so would really appreciate advice from you all. Am a long-time MNnetter (mostly lurking namechanger).

Single woman, 34, no kids, high-pressure job, currently sharing a house with four boys men in London (which is exactly like you might imagine it would be). Badly wanting my own space and having only just become aware of the possibility of shared ownership (normal purchase completely out of reach for me on my own owing to lack of large deposit). I’m going to view a one-bed new-build flat this weekend. It’s not this one, but size/layout/finish/price/costs/area are very similar:

www.sharetobuy.com/properties/31218/

I’m essentially trying to get a sense of whether this is:

a) A rare opportunity I should snap up if I can get it. Flat is lovely and meets my needs and lots of my good-to-haves and I comfortably meet their stated eligibility and affordability criteria with some deposit borrowed from family. I had assumed the competition would be fierce and the salesman I’ve spoken to is certainly trying to give me this impression - I’ve been told that the viewings schedule is very busy (only a few flats are left) and that I should bring my credit card to make a reservation on the day if I want it. There don’t seem to be many other similar options I can apply for/expect to get owing to restrictions about living in borough. Have got a good feeling about the place and am very tempted to just go for it if I can: would love to move into a place of my own (which I’d thought I’d never have) by September. For various reasons I’d love to feel I’ve moved on this year. It’s an area in which I think long-term value is likely to rise.

OR

b) A foolish/undesirable move in a falling London housing market with Brexit-related uncertainties. It’s more high-end/luxe finish than I really need or have experienced before and service charge is substantial. I’ve detected a slight whiff of desperation in the sales associates I’ve spoken to recently. This developer are offering a discount on the fees and he’s very keen to get me there - he seems to imply that my application would be successful if I put the deposit down first rather than going through a further priority sift (whereas I’ve read older stories of people applying for multiple properties in their borough and being repeatedly rejected as not high priority enough). Could they be struggling to seem competitive in a falling market (this seems crazy given everything I’ve ever experienced in London)? If so, do I risk being ripped off? I believe housing associations have to go on initial valuation and can’t take offers/negotiate, but no idea how to judge the ‘true’ value of a property against current market? Non-SO properties in same building are selling for much more, but these are bigger/posher. Overall property price too expensive to use my Help-to-Buy ISA even though my share is within the limit, which is really annoying.

The two things I’m most worried about are getting into negative equity/being unable to resell, and the impact on my living costs. These would go up substantially from my current outgoings (i.e. by hundreds of pounds): I currently spend 32% of salary on rent/bills/travel, this would increase to 47%. They obviously think this is fine as I’m £4k over required minimum income and if I'm honest there are plenty of non-essential costs I know I could cut back on, but it still seems a lot. I can’t see myself having much spare cash for staircasing in near future. If the rent/service charge increases by a lot, I could start struggling financially. There’s a good chance I’ll be promoted next year, but no guarantee.

I’m a first-time buyer with no experience and this will be the first place I’ve viewed - obviously I’m doing as much research as I can this week but I might need to make a decision pretty quickly, which feels rather scary. I know I’m likely to be met with high-pressure sales tactics during the viewing so I want to be as prepared as possible (am also taking a friend for a second opinion/moral support). I’d love to hear from those with shared ownership properties in London. Are you new build or resale? Have your rent and service charge gone up and how much/quickly? Have you managed to staircase at all? Has anyone had difficulty selling a shared ownership property in London? Would you make the same decision again?

From those with general experience of London market: would you buy in the current falling market or wait until Brexit situation clearer? Can anyone advise a good way to judge whether this window of opportunity really is time sensitive as the agent implies or if I have more time to mull it over? And whether the price is now inflated or not? This is really naive, but is there a sort of independent advisor I could ask about a particular lease/property value - what would I search for (not mortgage advisor? I need a Phil and Kirstie!)?

Apologies for length and thanks in advance for any replies!

@hopespringseternal18 - mine is in Canada Water. Actually Canada Water tube station was a hoarded off barren piece of land when I bought (initially 40% of £50k, then staircased the remaining 60% when valued at £55k 4 years later).

The area has changed hugely - it was a real gamble at the time as it was the only way I could get on the housing ladder and stop paying what I felt was externotionate rent at the time for a room in a shared house.

As I staircased, I was able to keep the flat many years later when I met dh & got married. It's been good for us - now it's going to provide income when we eventually retire (still quite a few years away).

Prices in the area have increased by 9% year on year since we bought. Better invested in the flat rather than in a bank, and I had the time of my life living there as a single girl in London!!!

Artfool your timing was very fortunate. Where we live on the other side of London prices have been dropping since about September. There is a high end housing development that still hasn’t sold out & the unsold properties are now discounted and not selling.

Do the HA know you now rent it out @artfooldodger? Not normally allowed

I would look at SO resales, and try to get one with a good housing authority. We bought a Peabody SO resale in Hackney 4 years ago. The rent and service charge combined was £100/month!

We staircased to 100% and sold recently and were able to buy a house outright.

The new builds all look poor quality to me and seem to have been knocked up to satisfy planning criteria on luxury builds. I'd be very wary of service charge increases on a development like that.

Yes, it absolutely is allowed once you’ve fully staircased. The HA are fully aware. The mortgage was transferred to a buy to let, its insured, annually checked, etc, etc.

I never bought it as a buy to let - it was my home for nearly 10 years. My circumstances changed.

Interestingly a friend who lived with me for a couple of years loved it so much that she bought a similar flat (also fully staircased) just around the corner. She’s since sold hers and moved out of London. She made around £100k over 4 years.

Watching this thread with interest. I have a teeny tiny amount put aside with a view to saving towards a deposit but there are some shared ownership properties near where I currently live that suit my needs perfectly- namely they are in walking distance from DDs school and close enough for me to get to work. I hear so many pros and cons re shared ownership that it's hard to know whether it would be the right thing to do.

my ds purchased a resale sb he tells me it costs less than rent flat. re resale they come on the market all the time & local area is considered both in where you work and where you live. He is actually saving money at the moment. The other help to buy system seems to be far more/massively overpriced compared to share to buy - what people forget is if staircasing (buying larger share) & the house price goes down your share cost may well go down. Purchasing any house goes through ups and downs & if you are thinking in short term don't bother - if your in for long term than its worth it. He lives near the overland (?) service into London. To repeat check website daily often places are on for very short periods for viewing (nb if you miss one in block you like keep eye open for another)

has anyone ever really regretted buying a property in london??

i very much doubt it :)

its always a risk op - go for it

Thanks everyone for range of views from 'go for it' to 'you'd be insane'! I suppose I did ask for this

Still trying to get a sense for whether this is a rare/competitive opportunity or an overpriced luxury box that they are desperate to flog...

You've certainly given me pause for thought and avenues for further research - and I very much doubt I'll be putting the reservation deposit down on Saturday like the agent suggests. But the simplicity of it all still tempting...

I work in building / selling so properties for a HA.

there is usually a lot of interest in them and so we dont tend to lower price against the valuation, but check how long they have been marketing for
.if it's been over 3 months now they may accept a lower offer. if it's marketed by a external sales agent and not the housing associations internal team, they will have added fees over and above the valuation, which means there is space for them to lower it.

if the property isnt built yet dont get your hopes up about moving in until around 3 months later than than theyre currently saying. things always go wrong and there's a lot of problems at the land registry at the moment, slowing every thing up.

I bought a s/o property myself and did actually make money on it, made enough money on my 25% share to allow me to have a deposit for a private property. such rises arent going to happen for 5 plus years now but if you're in there for a long time you shouldnt have to worry about not making any money or being in negative equity.

there are service charge caps. so just make sure the lawyers fully explain this to you. it's usually a couple % rise per year max. so do your calculations and see if u can handle that for 5,6,7 years time.
if there are lifts, concierge or anything remotely fancy in the building then service charges are unfortunately likely to be high. I always try to strip back everything but it's crazy the charges the HA get billed to manage these things, which we do have to recoup.

if u want to pm me which property it actually is i might be able to help with how good a deal it is and what the association is like

oh and who the actual developer is.. as the quality differs a lot

It’s very easy to find out what development it is!

I would just add my views to the dilemma though. My DD was renting in zone 1. Elephant and Castle. She needs good transport links for work. The rents are very high. To buy in that building is around £575,000 for a 2 bed. That area has no life and is a YoPro zone! The dilemma for her was that she’s self employed. She may well make the income levels for SO, but no proof as yet as she’s only in her first year of being self employed. So, we helped her to buy in an area just down the road from E&C.

So, we might lose money. However, it’s her flat. The mortgage is currently on our own house. Prices might go down but decent property near underground stations with excellent links are still selling. She’s no longer paying rent. The service charge is too high! We know that. However you still have to factor in that you need to be in a certain location, you need transport links and you want something that’s yours. There are risks with everything in life.

It’s rather pointless saying how much property values have risen over the last 10-20 years in London and how well everyone has done. Who on earth can now buy at a snip? It’s very rare. However, if everyone pulls out of buying it might make prices come down a bit, but the OP will still be paying rent waiting for that to happen. It’s a mega expensive wait.

So, look at all the small print op. It seems to be in an area of new development in CW but if it ticks all your boxes, then go for it. The salary levels required are quite high so will price out teachers and nurses, even on joint incomes I think. The Housing Association has won lots of awards so I cannot see that they are bad. It could be overpriced. You will find new property always is, but where else can you get on the property ladder in London for £120,000? You cannot. You should also look at property prices in the area to see how this stacks up. Look at sold prices rather than asking prices. How big is the flat (sq ft?). Size and proximity to underground makes all the difference.

Nine Elms will bounce back once the underground goes in. It is highly priced for a fairly meh area.

Thanks so much @shapeshifter88, I will PM you.

Thanks @BubblesBuddy, that's really helpful. Can I PM you about the HA?

I agree with Johnnyfinland Most of the newbuild shared ownership flats have exorbitant service charges on top of rent and no, there is no way of knowing how much either service charges or rent will increase. This is the worst time since the crash of 2007/2008 to buy in London.

God it’s so hard to know. I bought a shared ownership a decade ago and it changed my life insanely for the better. But I was 28, had exactly the same living scenario as you Ie lots of adorable/messy/disorganised flat mates. BUT it was in an area that has gone stratospheric in value, and I had a great mortgage (no deposit at all ) and essentially, good timing.

I sold 7 years later and service charge had gone up from £70pcm to £150 in that times

The reason it changed my life was that I was very ambitious and worked in an industry that was poorly paid at the bottom and well paid from the middle up. The flat let me, for the first time, live like a professional (I mean in the kind of way that professionals in other places would take for granted, but which in London were out of reach.) The confidence and dignity and self assurance it gave me every day and the opportunity to rest and recoup and decompress every night were worth it. I mean, basically we should all be able to have this, right? But while lovely, it was much cheaper and less glamorous than your one.

If you’re going to be doing what you do, and want to live where you live (and battersea does seem to be having a lot of jobs move there, several thousand of my old colleagues are shortly to relocate there), then it’s worth cautious investigation. But really, really dive into the leasehold charges, as if it’s owned by a housing association, there is no ability to club together and disputes charges.

I bought SO 2 bed with DH in 2002 and we are still here. I won't say where it is but SE London near a (now) Overground link. It was £165k, worth around £400k now. We bought 50% then staircased the rest within five years.

Advantages: easy way to get on the housing ladder.

Disadvantages: staircasing depends on the current market, not the market you bought your initial slice with.

Watch out for costs: ground rent, service charge, rent on unmortgaged slice, etc.

Read the lease very closely. Mine excludes pets (but we have a cat. We want to move so really do not GAF).

If you need to changed the windows, doors or changed the internal layout our freeholders demand consultation (and usually reject).

Look at the materials your block was built with. We gave wooden windows that need replacing. Despite uPVC being more efficient the freeholders don't want us to have them. A block across the road from us is clad in natural wood, which has never been treated, and is rotting. Glass structures are all the rage but are boiling hot in summer. Of course, since Grenfell, ask about the fire cert on any external cladding.

I wish you all the best wherever you decide to go!

Thanks @Granolabear and @VanGoghsLeftEar, both really useful posts (although I sadly won't be making a similar profit!).

Yes, living like a professional in a way people take for granted in other cities - that's exactly it. And I'm afraid I wouldn't call my housemates adorable!

I've dug more into lease re rent and service charges. The rent rise is capped at RPI + 0.5% which sounds fair? For the service charge there is no cap, but they must provide a breakdown of spending. The agent tells me that this is standard and that the HA "like to build a substantial reserve fund - and quickly with a new scheme, so that when the regular maintenance involved with managing a development occurs periodically, the funds are already in place, resulting in residents incredibly rarely ever beign asked to top-up the service charge funds due to a shortfall. This cannot be said for all developers and I often hear of residents being asked to contribute another £200/£300 each at the end of the financial year due to insufficient budgeting by the Management company." No idea if this is bullshit!

Will ask about windows and cladding - thanks for the pointers.

Re staircasing: bear in mind that you have to pay fees (eg survey and conveyencing) for both yourself and the HA. I've read that it can cost £1-2,000 just for the fees, on top of the amount you pay for the extra percentage. Realistically, unless you're expecting a large salary increase in future, or a partner to move in and increase your household income, you probably won't be able to afford staircasing.

Mortgage interest rate increases: have you factored in whether you can afford interest rates rising? Some of us can remember when they were in double figures. Use one of those online calculator thingies and see how much your mortgage would be at 8% interest. If you really want to scare yourself, calculate it at 10% or 13%!

Have you considered Greenwich? L&Q have properties there and there's a DLR connection to Canary Wharf etc, plus overland trains into London Bridge and Cannon Street.

Thanks @Plexie that's probably realistic re staircasing and I'm not expecting either!

Great point to mortgage and interest rates - hadn't even occurred to me. Will scare myself before I go tomorrow!

I thought Greenwich would more than Canada Water and would be longer commute, but will have a look - it is lovely. I just know so many miserable train commuters at the moment I was trying to stay on the tube!

Personally think the train is much nicer than the tube!

Hope - you're young? I'd probably do it if you can (having heeded some of the advice above and done your research). London prices - in the medium term - will probably make it worth doing and it won't get easier for young people. And having one's own place is wonderful.

Don't get too hung up on interest rate rises. When they were briefly in double digits in the 80s (which I am old enough to remember) inflation and wage rises were also in double digits. Being as old as I am I also remember the result of the 15% interest rate being a 20% house price drop followed by 10 years of static house prices.

You have a certain amount of security if house prices fall as you would lose a bit on your 25% but the cost to staircase the 75% would also fall and rent rises are inflation rather than property price linked. If house prices fall but interest rates rise it might make more sense to overpay the mortgage rather than staircase.

The biggest risk would be being a forced seller in a falling market if you lost your job so factor in how to mitigate this.

This is a very helpful thread. I have DDs about to start out in the adult World and housing options feel much more complicated than when I was young.

Just a little update for you all - went yesterday for the viewing - site is beautiful, flat lovely, and I loved the area. But I walked in to woman before me signing reservation for flat I was hoping for! My fault for making a late afternoon appointment - have learnt for next time. I also learnt that you get cooling off period with reservation deposit so would advise anyone looking to ask about this - I could have put reservation deposit on one I really wanted to bagsy mid-week, then come back to view with my friend. Never mind!

Only one left is overlooking road opposite regeneration area that will be huge building site for 10-15 years, which I don't think I can face. So after sleeping on it I'm leaving it.

Thank you so much for all your input, I can't say how helpful this has been in knowing what questions to ask! The agent said I had obviously done my research and had all the right questions It will all be useful for ongoing search - I can keep looking now in less time-pressured way, and see what happens with market as well. Hoping for a resale that will bring my living costs down rather than increase them as the luxury new-build would have done.

I'll update you if I find something!