Leasehold flat or shared ownership a better purchase?

[Idontlookyoung]

I'm at the early stages supporting my child looking for a property.

What's a better purchase for a first time buyer in your opinion?

A shared ownership of a 2 bed house or complete ownership of a 2 bed leasehold flat, where the building has less than 10 flats in it.

Which one do you think will be easier to sell on in future?

These are my thoughts. My DD and her partner had absolutely no problems getting a mortgage on a leasehold flat in London last year.

If they had decided to save for a house in the same area I think that it would have taken another 4 years or so, plus even more financial support from us (which would have been very hard).

Yes they will sell thats right. But using your DD as an example - they would now likley have to sell at less than they paid. This can be a big problem if the deposit was low as people can become mortguage prisoners. For the young thats awful.

I see that could happen. But unlikely in dd's position. The flats (it's a large private estate) have consistently been selling for more than they were bought for. Of course things can change, but that's true of all flat and house selling especially at the moment in this country. Dd's deposit wasn't particularly low either, it was around 20%.

Leasehold is everywhere in London, and decent flats in sought after locations sell!
And the other flats ...?
Anyway, it's irrelevant because OP's DC isn't looking at London.

It’s really tricky, isn’t it? I’m looking at a flat for DD near-ish the city centre in Manchester. Yes, she could afford a house somewhere in the city but it wouldn’t be where she wanted to live. If she rented, we would be paying probably over £14,000 a year for somewhere decent with parking, which over four or five years really adds up, she does want her own space because of her job and shift work she’s found houseshares tricky. I am concerned about resale, but I’m also concerned that she has somewhere to live now where she is happy.

I’ve spoken to a few estate agents, and I think we just need to be very picky about where and what we buy, the market is being skewed by new builds, by landlords selling, by the cladding stuff, but those aren’t necessarily the properties we’ll be looking at, and by selecting carefully we can minimise risk. They seem to think two beds sell better than one beds, and that gives her flexibility to have a tenant if she wants to at some point, so we’ll probably look at that.

I am definitely nervous, and we haven’t made a definite decision but I also hate the thought of just giving thousands of pounds to somebody else for rent.

A family member was recently looking for a two bed flat in central Manchester but discounted the idea for all the reasons mentioned here and in the Guardian article I linked to. Also - noise from people out drinking and coming back, general anti-social atmosphere at night, really. She’s going to buy a two bed terrace in a very average area further out for the same money (£210k). @KnutsfordCityLimits in that binary situation your DD is in re buying and renting, then I would go for a share of freehold two bed flat in a quiet part of the city centre, but a quick look on Rightmove tells me people aren’t making much money on flats (and some are losing money) so if she wants to move up the ladder she could end up stuck. Personally I would never buy anything leasehold.

They are completely different propositions.

This is worth a listen. I wouldn't touch SO with a bargepole if you have any other options.

Leasehold is also not ideal but I would consider it with a long lease + reasonable ground rent and charges.

The best option in your situation is share of freehold.

Because not everyone wants to. I was in a group of 6 blocks, each containing 6 flats, so 36 properties. We held meetings, did posters, had discussions but many people dont want to be part freeholder, they were happy with the leasehold system

OP - I wouldnt touch SO with a bargepole, so many problems trying to sell on, and I dont see it as good value for money at all

Leasehold flats can work, depending on the type of lease, the number of people involved, the price of ground rent and service charges etc

Better still is a share of freehold flat if availalbe or a conversion flat as they tend to have cheaper service chargers. Anything purpose built will have slightly pricier service charges.

But avoid SO at all costs.

I’ve discussed living somewhere else with her @everyoldsock- she can only live in certain parts of the city because she drives out to work, she does already rent In the New Islington / Ancoats area, as do lots of her friends, and noise has surprisingly not really been an issue, although obviously you only need one set of idiots in a block to cause problems for lots of other people. I would much rather she bought a house, but I can also see that she doesn’t want to live on her own in an area where she doesn’t know anybody, she’s not a party girl, but her Pilates studios are important to her! I’ve owned leasehold flats in the past, but when it was all a lot simpler. People are still wanting to live in cities though, and I still think if you choose carefully in the first place it’s risk but maybe worth taking.

Don’t do it. Too hard to sell in the future

I have a one bed flat leasehold, a house conversion made up of three. Fee this year is £2600 because of yet another fence repair. How do we own all of them?!

Owed since 2018 and only had 2 years without imposed capital expenditures. Building insurance is exorbitant and grouped as all the freeholder's properties so we can't shop around.

Most years 3-4K, one year with the roof was 8k. The personal loans helped smooth out the cash flow but locked me into ongoing debt.

I'm worried about it being unmortgable because of the fees. I have a house in another country (original home) that I'm selling to get myself out of this.

Never another leasehold again!

My SO house wouldnt be hard to sell I can sell mine on the open market not offer as SO. So the same as any other person selling. Luckily I live in a popular area. In my row of houses I am the only SO house left.

Leasehold flat here in north London
7 flats
37£ ground rent for been the same for 30 years

And we only pay 700ish a year for repairs / maintenance and insurance

im
fine with it - and the flats are always selling and new people moving in and out loads and everyone owns them no renters
prices going up all the time
so no not seeing the same issues other mention

I bought a leasehold flat in 2012 in a major city for 350k. Sold in 2023 for 185k, and that was a struggle. Lost half my money, over 175k after fees over 10 years. Service charges and ground rent went from 2500 per year to nearly 9500 per year. No one would touch it. Today it's nearly a thousand a month service charge, building insurance and ground rent.

4 viewings in a year.

Mine was the last flat to sell. Others are on today at 150k, potentially a loss of 200,000 pounds for the vendors who are now early 40s with children.

Don't even consider a leasehold flat. It's a financial disaster and will ruin your life.

Shared ownership just as bad.

If they can't afford a 2 up 2 down, they shouldn't buy anything.

Look up First port. They are all the same though... If you want to give someone else, a faceless suit, control of your financial life, buy a leasehold flat... They will take every penny they can, legally too. First you won't be able to afford a car, then it'll be holidays, then trips out, then eventually you'll be worried to buy a stamp...

I wouldn’t necessarily rule out the leasehold flat just because it’s leasehold, but I would want to know quite a bit more before deciding.

In particular, I’d check the remaining lease length, service charge and whether it has risen significantly, any planned major works, ground rent provisions, who manages the building and whether there have been disputes with the freeholder or managing agent. Those things can make quite a difference both while you own the flat and when you eventually come to sell.

There’s a fairly straightforward guide to buying and owning a leasehold property here which may help explain some of the things worth checking:

https://thesilverbrief.blog/leasehold-property-guide/

I know of cases where it's taken up to 4 years to sell because even though people can sell on the open market, they are restricted in flexibility on the price.

If the price the housing association quotes is too high and doesn't accurately reflect the market price you are screwed. Or if the market drops and you haven't sold you are screwed.

Generally speaking people expect to make an offer below asking price. You can't do this for SO.

How old is the leasehold? Is the service charge fairly static? Has it got a healthy sink fund?

How long are they planning to stay?