Shared Ownership or Rent?

[Yvemen]

Hi Everyone,

I’m having cold feet and would love a bit of advice.

My partner and I are ftb with 4 year old DD. The plan is to buy 25% of 2 bed flat in Greenwich, London this summer but I am now finding myself having cold feet and stressing about if shared ownership is the right route to go down or if we should just be patient for another few years and buy a house on the open market?

We were planning to put down £15k for our deposit but I’m thinking, would it be a better idea to put that into savings, keep adding to it and come back in a few years to buy a 3 bed house which could last a longer amount of years rather than 2 bed flat?

I can’t tell if I am just panicking because this is the biggest amount of money I will ever spend or if I am having a massive lightbulb moment and seeing sense

The difference in monthly cost would be around £1400 pm if we did shared ownership and £1500pm if we rented. I hate the whole renting and throwing money down the drain thing, but is it better in the long term???

Thanks in advance!!!

As a long term renter, my instinct is to buy the flat. It's property...that's an investment an Greenwich is always going to be desirable.But could you speak to an independent financial adviser? One appointment won't cost much.

DPs first house was SO. He bought 50% at first. A few years later the market dropped and he was able to buy the other half for a much cheaper price. He then owned 100% and the freehold.
The market then improved and when he sold it 8 years after buying the first half he had made money on it (about £50k on a £180k house). As a result we were able to buy a much bigger house the next time round as we had a good chunk of equity.

They are a pain to shift on afterwards though (the HA really dragged their heels - we had to offer it to them first before putting on the open market).

You do know the flat is on the open market like everything else for sale.

With all due respect you will need a damn site bigger deposit than £15,000 for a 3 bed house.

How many years have you taken to save that amount and if you don’t buy and continue to rent as property rises in a few years you will still be looking at 2 bed flats.

Go for the flat now. You are saving £100 per month.
When you come to sell you will also get the potential increase in the value of the flat as well as any savings.

Remember you are buying a home.
It isn’t going to be a forever home but it is a home that costs less for the next few years.

As an alternative if you only have one child. (friend did this for years with 2 children)
Would you be better off buying a 1 bed place that was 100% yours.

Child/children sleep in the bedroom and you and Dp on a bed settee in the living room.

That way if the property market has a wobble and your life plans change (emigrate, get a job the other side of London) you can rent it out in the short term

Got a very different opinion! S/O may have worked out well for some but has also brought much misery for others. There are many costs associated with S/O - many of which are unregulated e.g. ground rent, service charges, permission fees etc.
Do your homework thoroughly. Google the developer and managing agent. Join National Leasehold Campaign to inform yourself/ask questions.
Your service charges alone could be over £100 a month.

Can you move slightly out of London?

We looked into shared ownership... So much was completely unregulated. We heard too many horror stories

I work in the property industry so have some insight to SO. Personally think any step on the ladder is a step ahead of renting. So I would definitely do SO.

Don’t forget you can elect to pay stamp duty on the full amount now, So if you staircase (buy more of the property) you won’t have that to pay later. So buying, saving, staircasing is an attractive option.

It's it shared ownership with a housing association? They're very transparent with their rules and clear on calculating rent and service charges.

I think it's much better for you to buy than keep on renting. The difference is much more than £1400 vs £1500 as you're paying down the mortgage so you'll be £££ better off after a few years.

However, I also think that it would make sense to look in more affordable areas rather than be dead set on somewhere very expensive. Are you likely ever to be able to afford a house there?

There are no 'cheap' 3 beds within about 10 miles of Greenwich - nothing under £350K in a safe, family area. You would probably need at least a 10% deposit and the income to raise a £300K + mortgage. At least with SO you'll be in a lovely area near the river/great transport and if you have two kids, they can share for a bit. Greenwich generally holds its property value as it's a desirable area. As a pp said, be careful re; extra lease charges etc.

@Lightsabre They do shared ownership outside Greenwich too. And it could make really good sense to get a cheaper 3-bed that the OP would be able to eventually buy outright.

And in Greater London, there are areas that are family-orientated, have lower crime rates and better schools than Greenwich. The trade offs are the prettiness of the area and a longer commute.

Having said that, 350k is good a good budget for a 3-bed flat (or even a very small house needing work) is a quality family area.

Shared ownership is better than private renting. It is secure and you can never be kicked out. You will have the peace of mind knowing kids are settled in school etc at least until you are ready to move out. Mr SIL bought 25% share for 30k 8 years ago. Sold 3 years later for 85k.

I would move out of London, prices are dropping with new builds loosing the most

Thanks so much everyone for your feedback.

Like I say, I think it’s just me getting cold feet because we are actually so close to the finish line. It has taken 3 1/2 years to save this deposit, where we really scrimped and saved, no holidays etc ( I’m sure you are all familiar with the method)

Regarding the area we are looking to do SO in, the reason why we haven’t chosen to a bit further out is because our DD will be starting a great school which is well sought after this September , literally 5 minutes away from the development. If this wasn’t the case I definitely will have considered some other areas which would have worked out slightly cheaper. We are not too upset about this though, as it really is a good area, and we have great roots here already.

We will be doing it with a housing association called L&Q and you are right, they are pretty clear on the charges and rules etc. The only thing that is really annoying me is the bloody service charge! It’s an extra £260 pm. I’m going to request to see a breakdown of costs so we know where it is being allocated.

Thanks again guys, appreciate all of the comments x

Also sooo good to hear the SO a success stories you’ve heard of! So much negativity out there and I was worried about the growth of the property we get.

But then again that’s with any property sooo

My friend sent me an article today which stated that, because help to buy scheme is ending in 2021, the ftb demand will shift to the shared ownership scheme for those that need help to get onto the ladder. This is also very encouraging as it means the possible demand for our property when we decide to sell in future shouldn't dip too much. (Providing the area + development holds its value of course)

Sounds like the right option for you. A nice new flat in an area you're settled in and near a school you want for your daughter.

The service charge does sound high. Do they include heating or cold water or some great amenities on site?

Oh, and if the value of the flat went down, you'd be able to buy more of it for less so not necessarily a problem.

Shared ownership resale properties can be good to look at (usually listed on the HA websites) as these have already depreciated - you're not paying that "brand new" premium yet the apartments are often only a few years old. You sometimes get older houses come up and these are fab as there tends not to be the same pricey service charge. Check your contract for how much the service charge goes up yearly, it's usually RPI plus a percentage - it's worth considering the affordabilility of this in years to come.

I think it's the rent that goes up at a certain rate? Service charge needs to be justified with expenditure accounts provided etc so the management company can't just decide to increase it by RPI+percentage.

You're right Jojo, I'm brain dead this evening!

@JoJoSM2 Yes is the amenities include gym, concierge, underground parking and keeping the overall development clean and without rubbish but I’m not sure about what else it covers yet!!

@MoodLighting yes, you have a point about resale properties! Problem is that so many of these resales are selling their 50% share or 70% share and we just do not have the deposit for that. It ends up being a deposit of 26 grand plus!! 😱 And many people who have to go down the route of SO, including me don’t have the cash to put that money down .

A gym and especially a concierge will bump up the price. If the desk is manned 24/7, then that's 5 full-time concierges...

Hi i am in shared ownership.
Firstly, if youd like to take a min to read, sign, share? petition.parliament.uk/petitions/261118?fbclid=IwAR2_s73vVFkYbbw9_8pFDbvLGdRqOl1hjvUeGS5eJZHNJfPocsvValj85Tc
Problem is your only saving £100 a month vs private renting.. not really enough in my opinion for the negatives of shared.. we save £270 a month.
So you'll need a Lease extension in future this will be around 10k. I hope its something you can afford or your property loses value and becomes unsellable.
You will have to maintain it so realistically need to save about £100 a month.
Service charges are unregulated and can be awful
H/As are no bodies friend especially not in Shared Ownership. I truly believe they see their shared owners as a money pot.
Leases are also just a piece of paper with a right to live in property for x years . In essence and in law a tenancy sadly :(
Its really up to you but there are some bigger negatives.
Leases are a issue at 80< years. As a shared owner on a affordable scheme you are not exempt. In fact you can have more of a financial burden then someone at 100% ownership as you are not even entitled to a lease extension & if you get one you are at the mercy of profiteering h/as.
We are with Guinness, steer so very wide of them. They charge 100% premium to extend even if you only own 25% not really fair!! and their admin fees on top for basically nothing are terrible also.. they are also very incompetant and hard to deal with generally.

But lease extensions only become an issue if you stay too long.

I get the impression that for op it is a stepping stone onto buying a house in the future.

Op would not only be saving £100 per month but also the flats resale value will rise in the future so it will be like adding another few thousand to their savings.

Heyya yeh i agree you are potentially making money in future . Potentially.
You cant say that about Leases as once its at 85 years a mortgage company wont touch it. You cant ever guarantee youll have enough to staircase either.. you may think you will but this is no way guaranteed at all- i think OP needs to be very aware of the potential Lease Extension fees coming there way :)
And when you buy a house is it not for long term usually? For me it was anyway- its a very important thing & i wanted them to be aware of it as its very difficult if it comes around to it

housing associations extend the lease when you want to sell. It is in their interest too as they own the largest share. . I think family mosaic do.