Talk to me about shared ownership

[Jj2431]

Just as the title says really..anyone done it? Regret it or happy? Talk to me about it
Thanks

We very nearly did ten years ago when we were FTB's but decided not to. I actually got talked out of it by somebody at HSBC but it was more because of the area and not the fact it was s/o

One thing that would put me off is that if you go ahead with s/o then sell in the future you will only get a percentage of what the house has gone up in value

If you don't get much joy on here have a look in the House Buying & Selling section of the Money Saving Expert forum, always posts about s/o on there. You can do a search too

It depends why you’re considering it. If it’s mainly so you can get something you perceive as being better and newer than you could afford outright on the open market, then I’d think carefully: you’ll be paying a rent and a service charge and unless you’re in a very popular area then they can take longer to sell on, particularly if you’ve purchased a relatively high share.

Shared ownership has an absolute place in the market if it’s the only means by which you’re ever likely to afford to buy because you have little chance of ever saving enough of a deposit or earning a high enough salary to get the mortgage you need for an outright purchase. The downsides still remain, but they’re better on balance than the downsides of private renting potentially forever.

I did it when I was a first time buyer and had no problems. I was buying alone so it was the only way I could get a foot on the ladder. I sold at a 30k profit after 3 years so was definitely worth it for me. But I benefited hugely from property price increases, and think I got lucky with selling!

Others have not been so fortunate!

Thank you. I am only at the early stages of looking into it. We really want to move as we are currently in a not so nice area in a 2 bed terrace with 3 children. 2 boys and a girl. It would take us a lifetime to save a decent enough deposit for a 3 bed house in a decent area but having looked on rightmove there are shared ownership new builds in a very sought after area with 3 bedrooms and big garden that I believe we could afford.

I did it as a first time buyer ten years ago. It was the kind of shred ownership where you get a mortgage for your bit and rent the rest from a housing association.

Things to check-

Who is responsible for what, e.g. repairs.

Is there a service charge and how often are they allowed to review it? Mine got ridiculous in the end.

What is the mix in the rest of the development? The top two floors of my flats were the same as me, the rest were housing association rented and the tenants seemed to only be short term/quite problematic at times.

How easy is it to get out of it when you want to sell your share? I had to go with the housing association valuation (which they try to keep affordable rather than market rate) so didn’t have as much to put down as a deposit on my new place, and I had to give them ten weeks to find a buyer from their list before I could put it on the open market.

I did it. Couidnt afford it any other way. Over 12 years gradually bought the rest. Made 150k when I sold it. This was in London.no problems. Best thing I ever did.

My first property was shared ownership (many moons ago). I was lucky with property prices increases, but it definitely gave me the leg up I needed to buy a property that wasn't a shared ownership a few years later. I wonder if long term I would have started to resent the rental element (as I seem to remember the mortgage and rent added up to about the same amount as a non shared ownership property), but it really worked for me in the short-ish term.

My son bought SO about 2 years ago and it's working brilliantly for him. He's been able to buy a much bigger home than he could have afforded on a single wage and his mortgage, rent and service charge together cost less than it would for him to rent something half the size. It was a SO resale and was definitely much better than value than a SO newbuild.

Comtesse is absolutely right.

If it's absolutely the only way for you to buy because you won't ever save a big enough deposit or earn enough for the open market....look into it.

If you could afford something on open market, but shared ownership will give you bigger or shinier or new, which you like the look of but couldn't afford on open market.....steer well clear.

If you can buy property without the significant downsides, it's best to avoid SO. Some people are tempted by shiny new or an extra bedroom seeming affordable on a mo they basis, but dont really look at the overall costs over the long term, and it keeps them pretty poor for decades then....and poverty which could have been avoided by living somewhere a bit older or perhaps a bit smaller.

It never hurts to ask lots of questions and gather all the info though, so you can make an informed decision. And you often have to work hard to get all the longer term costs you might face....and that's where a lot of people don't do due diligence.

The thing is, the days of big house price rises which made SO or Help to Buy make more sense for more people have probably gone. But if it gets you out if long term private renting and is the only way, it may be worth it.

Like lots of things, those who seem to be able to afford least, can only buy via a more expensive route. It's a shame when government and housebuilders especially seem to be the winners in these schemes.

Comtesse is absolutely right.

If it's absolutely the only way for you to buy because you won't ever save a big enough deposit or earn enough for the open market....look into it.

If you could afford something on open market, but shared ownership will give you bigger or shinier or new, which you like the look of but couldn't afford on open market.....steer well clear.

If you can buy property without the significant downsides, it's best to avoid SO. Some people are tempted by shiny new or an extra bedroom seeming affordable on a mo they basis, but dont really look at the overall costs over the long term, and it keeps them pretty poor for decades then....and poverty which could have been avoided by living somewhere a bit older or perhaps a bit smaller.

It never hurts to ask lots of questions and gather all the info though, so you can make an informed decision. And you often have to work hard to get all the longer term costs you might face....and that's where a lot of people don't do due diligence.

The thing is, the days of big house price rises which made SO or Help to Buy make more sense for more people have probably gone. But if it gets you out if long term private renting and is the only way, it may be worth it.

Like lots of things, those who seem to be able to afford least, can only buy via a more expensive route. It's a shame when government and housebuilders especially seem to be the winners in these schemes.

Echo what is said here.

Also, if the market looks like its about to tank - avoid like the plague. (big hint here)

Shared ownership really only works in a market where prices are increasing. If they are declining you risk the negativity equitity trap with steriods. Particularly if service or rental charges go up year on year.

I've heard of people getting stuck because they are only allowed to sell at the price the housing association agrees. This means no ability to take offers or drop the price easily. I know of one case of a person trying to sell for 4 years because of this problem.

There's also the sublet issue. If you need to move for any reason, if you can't sell, you also can't lent the property out. We had neighbours with this problem.

Another neighbour had problems but she did at least have the security of being able to stay in one place and not move around with her daughter in rented accomodation.

We bought in a nice area, rather than looking further afield in 2007 at the height of the market, anticipating a crash. It worked for us, but only just - because we paid extra off the mortgage, staircased and because DH's salary went up so much in 10 years to counter balance what the property lost in the crash (we staircased at the bottom of the market and sold at about parity with the original price). We were very much the exception to the rule, and our experience makes me very hestitate about recommending it, particularly in the current climate.

It definitely has its place, but you need to go into it with your eyes open and in all honestly, if there is an alternative or you can buy a house outright, thats what I would do with the benefit of hindsight.

Its probably only really a good option for those who would otherwise be renters forever otherwise in all honesty.

Thank you for all of your feedback. It has given me a lot to think about.

SO is the best thing happened to us.
you pay service charge on open market property or SO, except houses with no shared communal area, the service charge thing is nonsense.

after 17 years, sold couple months ago service charge was £95 per month including insurance, zone two bordering zone 1London with a lift.
purchased 100% sold on open market the price you want to.
as long it is sold three months after owning 100% in my case.
if you are considering SO it means you can't afford to buy outright like us, so paying rent for a share you don't own it is only fair, I puzzled how people expect not to pay rent, remember this option is for people who can't buy outright.
I paid £320 per month 2 bedroom flat for the 50% way much cheaper than open market rent.
sold over three times the purchased price.
maintenance inside house is your responsibility. roof, window frame or anything outside is HO responsibility.

In times where property prices were reliably increasing it could have good results as people said but at the moment I would avoid like the plague. There are extra charges for buying and selling shared ownership because the process is different than regular purchases, you usually have to use the housing association’s recommended conveyancer which can be more expensive, stair casing is not always possible if the value does increase, as you have to pay for a valuation every time you want to buy more shares. It can work out costing more than renting because you’re paying rent, a mortgage, ground rent and service charges. Most SO leases are 99 years so if you don’t extend (another expense) you’ll have trouble selling as nobody wants a short lease, and the leases are less secure than a standard leasehold property. It is no more secure than renting - the HA can in principle evict you the same way a landlord could, and legally they don’t have to reimburse your purchase costs if this happens. Then there’s cladding - a whole other nightmare, but many new build flats are not compliant with the required fire regulations so are nigh on impossible to sell or buy right now. Houses obviously won’t have this problem.

I was looking into it myself but some heavy research and talking to people who’d done it put me right off

@namechangeforfriday

In times where property prices were reliably increasing it could have good results as people said but at the moment I would avoid like the plague. There are extra charges for buying and selling shared ownership because the process is different than regular purchases, you usually have to use the housing association’s recommended conveyancer which can be more expensive, stair casing is not always possible if the value does increase, as you have to pay for a valuation every time you want to buy more shares. It can work out costing more than renting because you’re paying rent, a mortgage, ground rent and service charges. Most SO leases are 99 years so if you don’t extend (another expense) you’ll have trouble selling as nobody wants a short lease, and the leases are less secure than a standard leasehold property. It is no more secure than renting - the HA can in principle evict you the same way a landlord could, and legally they don’t have to reimburse your purchase costs if this happens. Then there’s cladding - a whole other nightmare, but many new build flats are not compliant with the required fire regulations so are nigh on impossible to sell or buy right now. Houses obviously won’t have this problem.

I was looking into it myself but some heavy research and talking to people who’d done it put me right off

I was going to write a detailed message with every item you mentioned, then I realised every single item you mentioned is the opposite to my experience.