Shared ownership

babyhead

My OH and I are considering shared ownership. I have received the info pack today and I am trying to get my head around the staircasing and whether it is actually a good idea in the long term.

The house we are interested in is limited to 80% ownership. So we would buy the 50% share at 85k. rent is 195 p/m on the other 50%. I gather the reason for the 80% restriction is because they want to ensure they can offer to other people in future.

What would be the point of purchasing additional shares upto 80%? We would never own it outright so surely we always would still pay rent on the 20%? The only positive we can think of to buying more would obviously be to pay less rent p/m.

If we were to want to sell in future surely it would be more likely that someone would be able to buy 50% rather than 80%??

Am I missing something? Has anybody else experienced this?

Planner

babyhead wrote: »

My OH and I are considering shared ownership. I have received the info pack today and I am trying to get my head around the staircasing and whether it is actually a good idea in the long term.

The house we are interested in is limited to 80% ownership. So we would buy the 50% share at 85k. rent is 195 p/m on the other 50%. I gather the reason for the 80% restriction is because they want to ensure they can offer to other people in future.

What would be the point of purchasing additional shares upto 80%? We would never own it outright so surely we always would still pay rent on the 20%? The only positive we can think of to buying more would obviously be to pay less rent p/m.

If we were to want to sell in future surely it would be more likely that someone would be able to buy 50% rather than 80%??

Am I missing something? Has anybody else experienced this?

So the property is worth £170K. If you buy 50% and the price of the property goes up to £200k, then you and the Hosuing Association will recieve £15K of the profits each should you sell it. If you buy 80% and the value of the property goes up to £200K then you will recieve £24K and the Housing Assoication £6K should you sell it.

If the price of the property goes down, I believe you suffer the full loss of value no matter what share you own?

So a higher stake is better in times of rising property values. A smaller stake is indifferent at times of falling or stagnant property values (if your not planning on selling until at least the property returns to the same value you paid for it).

Therefore how bullish are you of an increase (or at least not a further fall) in property values over the next x number of years?

babyhead

Thanks.
to be honest - I had assumed that we would only make a loss. The house is probably overpriced considering that a similar property sold recently on the open market for 152k. and from what I have read on here - shared ownership properties usually are a bit overpriced??

I hadn't considered the fact that the house price might rise. Although I would be very surprised if it made a significant rise.

lonestar1

by letting you own 80% max it means that you are still at the Housing Associations mercy when it comes to the dreaded Service Charge

Expect this to start out quite reasonable only to shoot up each year

A money making scam indeed

Planner

babyhead wrote: »

Thanks.
to be honest - I had assumed that we would only make a loss. The house is probably overpriced considering that a similar property sold recently on the open market for 152k. and from what I have read on here - shared ownership properties usually are a bit overpriced??

I hadn't considered the fact that the house price might rise. Although I would be very surprised if it made a significant rise.

If you where expecting a loss... where you expecting it correctly?

You need to remember that the Housing Associations share will always be worth £85k no matter how far the market drops. So if the value of the property drops 25% in value from £170K to 127.5K the housing associations share will still be worth £85K and yours will be worth only £42.5K effectivley you would take a 50% loss in your asset from a 25% drop in market value.

babyhead

Planner wrote: »

If you where expecting a loss... where you expecting it correctly?

You need to remember that the Housing Associations share will always be worth £85k no matter how far the market drops. So if the value of the property drops 25% in value from £170K to 127.5K the housing associations share will still be worth £85K and yours will be worth only £42.5K effectivley you would take a 50% loss in your asset from a 25% drop in market value.

:eek: No I wasn't. I had not realised this to be the case. That is shocking! It doesn't make reference to this in the info pack I have. It states the following (in the what happens when I want to sell? section)

There are three main costs, these are:

Any outstanding rent monies before completion
0.25% of the agreed average of the open market valuation for 100%
The association's solicitors fee, currently approx £150 + VAT.

Obviously there is a lot more specific info as to process but this - no where does it refer to this.
Unless I am being stupid and this is what 0.25% of the agreed average of the open market valuation for 100% means???

babyhead

lonestar1 wrote: »

by letting you own 80% max it means that you are still at the Housing Associations mercy when it comes to the dreaded Service Charge

Expect this to start out quite reasonable only to shoot up each year

A money making scam indeed

It does seem to be. The rent goes up by 5% each year.

Planner

Maybe im being alarmist!

I can remmember looking at shared ownership myself last year, and this was the big put off for me that, you would foot 100% of any losses but only your % share of any increases.

Its worth bottoming that issue out with them if I where you.

Thumper7

Hi

If you can only buy 80% maximum I wouldn't touch it with a bargepole.

I bought a shared ownership flat in 1991. I originally bought 25% then purchased the final 75% in 2003. Really should have purchased the final 75% earlier but was enjoying life too much.

If the flat made a loss so did the HA and vice versa if the flat made a profit.

Thumper

babyhead

Thanks for all your comments.

It does look like it's going to be a bad idea. Why do people do this? Desperation for their own house??
I am going to ring them today and see if they can convince me other wise!

Wickedkitten

babyhead wrote: »

Thanks for all your comments.

It does look like it's going to be a bad idea. Why do people do this? Desperation for their own house??
I am going to ring them today and see if they can convince me other wise!

If I had a pound for everytime that I've read the words "it's the only way I can afford to buy a house" on here with relation to Shared Ownership schemes, I'd be minted