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Government FirstBuy Scheme - what where and how!
Comments
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Shinkansen wrote: »I'd like to give some actual information as someone who spent months researching shared-equity schemes and is currently going through the motions as a key-worker. This is applicable to part-buy/part-rent schemes and NOT the equity-loan scheme.
First off, I would like to point out that under Government-backed (key difference) shared-equity schemes, if your property loses value, then the loss incurred is shared between yourself and the developer. If you purchased a 20% share of a £100k property (for example) but it only sells for £85k, the developer DOES NOT receive £80k and you only £5k of your original equity. Certain property developers offer their own shared-equity schemes where this IS the case, losses aren't shared and they get ALL their money back.... be wary of these and make sure you read the small print. These guys are out to make a profit, the Government aren't.
Secondly, I teach economics as a profession. Whilst I would like to believe this is some grand conspiracy theory to prop up house prices, it really isn't. There is enough money allocated in this budget for 10,000 home purchases. There were almost 30,000 mortgage approvals in February 2011 alone.... that's 1/3 of one month's mortgages. That really is not enough to prop up an entire industry.
Thirdly, house prices are always going to rise in the long-term. Inflation cannot, and never will be eliminated, as it's impossible. Also, we live on an unbelievably small island so land is at a premium... Canada for example is home to less than half of the population of the UK in a country that is larger than Europe. It's no wonder that housing is expensive. Lastly, the population of the UK is growing and construction of housing is not keeping pace, especially thanks to the recent recession, credit crunch and bleak future outlook. This means demand for housing is likely to outstrip supply, pushing prices up.
It's better to be partly on the ladder than off of it completely pi$$ing your money away into someone else's back pocket. Why has no-one looked at the positive points of these schemes?
1. You have a brand new flat/apartment/house. The advantages are obvious. Brand new fittings, fixtures, carpets, appliances, roads, landscaping etc. Wear and tear is simply not an issue. Any damage to the property will be caused by you! Discovering damp, structural problems, building regs associated with dodgy antiquated houses, discovering infestations etc are simply not an issue.
2. As the place is brand new, there is a 10-year NHBC warranty on any property.
3. You are buying a SHARE. If you are worried about the risk in the housing market, by definition, you are minimising your exposure to the fluctuations in house prices. You are able to buy future shares in the property any time you wish.
4. Interest-rates are at an all-time historic low. This is a buyer's market IF you have the finance.
5. The combined rent, management fee and mortgage payments amount to 28% LESS than renting the cheapest one-bedroom flat I could find in the private rentals market.
6. If you wish to make any extra payments on your mortgage you are free to do so any time you wish. In fact, I was encouraged to do so.
7. Resale is not an issue. There is lots of pent-up demand from first time buyers in the market and this is likely to persist into the future. The properties made available to you are obvious first-time buyers properties in nicely developed areas and as such will always be in demand.
8. The property I am purchasing is by no means a "shoe box". Otherwise, I wouldn't want to live in it. It's as simple as that. Renting a one-bedroom studio (bedsit) is still 28% more expensive than my monthly outgoings. You are allowed to purchase a property with one "extra" bedroom than you require for your needs, if you so wish.
So, all in all, the Government schemes really aren't a scam. I have to admit, I was of the belief they were "a bit fishy" and I have been trying to find the catch by reading all the small print. The only real catch is that living in an apartment there comes a management fee, and this will need to be paid regardless of my share, be that 25% or 100%. This really is miserly though at around £24 a month and goes towards repairs, landscaping, office staff and subsidising rents... there is a reason for it. You even have the right to challenge the management fee if you don't agree with it.
All of this talk of "Oh, you'll go straight into negative equity on this scheme" is rubbish. Where I live house prices are rising. ANYONE who buys a property runs the risk of going into negative equity, and unless you can predict the future this is a risk everyone has to take.
The other option is to save a deposit... well. I don't know about you but I don't have £20k+ hanging around nor do I have an account with the Bank of Mum & Dad. If I were to rent, given average rent prices, this would take me somewhere in the region of another 8 years to get together on my current salary. I tell you what, I value my TIME on this planet more than what's in my wallet... it's just paper. I don't know about you, but I don't enjoy living at home in my 20's. This scheme allows me to take a cautious first-step onto a rung on the property ladder in a great, brand-new apartment whilst actually accruing equity in a property rather than pi$$ing my money down the toilet like private rentals do. In a few years I plan to have enough money, together with the sale of the equity in the apartment to get a 20% deposit on a much larger property.
I hope this post has been of some help, if anyone has any particular questions about the scheme I am on then fire away.
Finally, a ray of sunshine when I was about to give up.0 -
When entering these schemes a buyer is at a high risk of stepping into negative equity on day one. Consider buying a new build flat for £100,000. In a shared equity scheme you pay the full asking price but a deposit holding buyer, cash buyer or investor will not pay the asking price, they will pay what Rightmove tell us is the average discount to the asking price of 7-8%. So, you pay £100,000 and your neighbours are likely to have paid £92,500. You have £5,000 of your own equity in the flat but the open market price is already £7,500 below what you paid, so you have virtually guaranteed 2.5% negative equity the second you sign the documents. So you need an 8.1% increase in the value of the house just to restore your original equity position of £5,000. That's no criticism of the scheme or comment/prediction on the market just how the mechanism operates in shared equity and anyone buying this way needs to be aware. You are unlikely to emerge with any equity unless prices rise quite materially.0
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Shinkansen wrote: »Thirdly, house prices are always going to rise in the long-term. Inflation cannot, and never will be eliminated, as it's impossible. Also, we live on an unbelievably small island so land is at a premium... Canada for example is home to less than half of the population of the UK in a country that is larger than Europe. It's no wonder that housing is expensive. Lastly, the population of the UK is growing and construction of housing is not keeping pace, especially thanks to the recent recession, credit crunch and bleak future outlook. This means demand for housing is likely to outstrip supply, pushing prices up.
Being a economics teacher I would of thought you would know better. Over the last 10-15 years there have been huge housing bubbles created all over the world. This has included countries such as the USA, Canada and Australia with huge amounts of land. The reason for these giant riseses in house prices eas internationally low interest rates, cheap fiance and loose lending to get market share.
Now the irresponsible finance has been pulled house prices are falling to normal levels. Japan a highly populated Island country like ours had 20 years of stagnation in house prices after giant rises and big collapse.Shinkansen wrote: »4. Interest-rates are at an all-time historic low. This is a buyer's market IF you have the finance.
Interest rates may be 0.5% but mortgage rates have huge mark ups way above this, far bigger than normal as they are trying to get more cash. So interest rates go up a little and some people are hit hard. Also many people have very high multiple of salary mortgages making them more susceptible to rises.
Encouraging people to buy when house prices are very high, falling and continue to fall is deeply irresponsible. You sound like an Barratts house salesperson rather than an Economic teacher.Shinkansen wrote: »7. Resale is not an issue. There is lots of pent-up demand from first time buyers in the market and this is likely to persist into the future. The properties made available to you are obvious first-time buyers properties in nicely developed areas and as such will always be in demand.
I recommend you look on this site for the first time buyers views on shared ownership, you will find the majority unfavourable of the scheme. Resale is one of the biggest issues for them as it is extremely hard with the extra regulations and poor demand.Shinkansen wrote: »All of this talk of "Oh, you'll go straight into negative equity on this scheme" is rubbish. Where I live house prices are rising. ANYONE who buys a property runs the risk of going into negative equity, and unless you can predict the future this is a risk everyone has to take.
You are so a vested interest and not a economics teacher. Let me guess house prices always rise and we will be property billionaires by Christmas.:rotfl:Shinkansen wrote: »The other option is to save a deposit... well. I don't know about you but I don't have £20k+ hanging around nor do I have an account with the Bank of Mum & Dad. If I were to rent, given average rent prices, this would take me somewhere in the region of another 8 years to get together on my current salary. I tell you what, I value my TIME on this planet more than what's in my wallet... it's just paper. I don't know about you, but I don't enjoy living at home in my 20's. This scheme allows me to take a cautious first-step onto a rung on the property ladder in a great, brand-new apartment whilst actually accruing equity in a property rather than pi$$ing my money down the toilet like private rentals do. In a few years I plan to have enough money, together with the sale of the equity in the apartment to get a 20% deposit on a much larger property.
Sorry but some of us have saved years for a deposit. It was the I want now brigade who helped us get into this financial mess in the first place.
You are so not an economics teacher.
:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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leveller2911 wrote: »People should save for a decent deposit and when they have they may just be a bit more interested in making sure the mortgage is affordable.
We have had far to much of this "I want it now syndrome"
agreed. but when the average income is about £25K and the average house price is about £175K that's very difficult. i'm 35 with a family and have been saving for 5 years. we are just below the average income level andit will take me 10 years at this rate to save for a deposit on a house. in the mean time, my letting agents and landlord continue to profit off of me.
if houses were normal prices in this country, that would be fantastic. the truth is, they're not and they never will be because too many people (including those in power) will be stuck in serious negative equity.
the truth is, short of a major supernatural disaster, houses prices will not fall in the UK.
the gov won't let that happen, and if i were a home owner too, i would fight tooth & nail to make sure they didn't as well.0 -
Shinkansen wrote: »7. Resale is not an issue. There is lots of pent-up demand from first time buyers in the market and this is likely to persist into the future. The properties made available to you are obvious first-time buyers properties in nicely developed areas and as such will always be in demand.
'Lots of pent up demand from first time buyers' is not going to be solved by you selling your house. If that were the solution, we wouldn't have the problem. The issue is first time buyers not having big enough deposits and/or not being able to secure a big enough mortgage.
If the banks loosen their lending criteria, this may help but it won't be affected by you selling.
If prices go down, this might help but you might not want to sell then.
If lending is not the issue and the demand is there, then FTBs and the construction industry do not need any help from the government. (Not that I agree with the idea of FTBs getting selective help anyway)0 -
if houses were normal prices in this country, that would be fantastic. the truth is, they're not and they never will be because too many people (including those in power) will be stuck in serious negative equity.
the truth is, short of a major supernatural disaster, houses prices will not fall in the UK.
the gov won't let that happen, and if i were a home owner too, i would fight tooth & nail to make sure they didn't as well.
Sorry strongly disagree. House prices have been falling month after month and show no sign of stopping. Nothing left can stop house prices falling now, even in the USA where they had the biggest intervention to stop price falls they still are collapsing.
Just because people are in negative equity doesn't mean prices will stop falling.
Save a deposit, enjoy the price falls and avoid this scam.:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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When entering these schemes a buyer is at a high risk of stepping into negative equity on day one. Consider buying a new build flat for £100,000. In a shared equity scheme you pay the full asking price but a deposit holding buyer, cash buyer or investor will not pay the asking price, they will pay what Rightmove tell us is the average discount to the asking price of 7-8%. So, you pay £100,000 and your neighbours are likely to have paid £92,500. You have £5,000 of your own equity in the flat but the open market price is already £7,500 below what you paid, so you have virtually guaranteed 2.5% negative equity the second you sign the documents. So you need an 8.1% increase in the value of the house just to restore your original equity position of £5,000. That's no criticism of the scheme or comment/prediction on the market just how the mechanism operates in shared equity and anyone buying this way needs to be aware. You are unlikely to emerge with any equity unless prices rise quite materially.
That's an opinion not a fact about the asking price as there will be developments where the price won't be lowered if you quote 'Rightmove' at them !
If you look at the previous Homebuy Direct Scheme then it did shield the homeowner from further negative equity over and above their contribution -
"The money that the buyer pays for your home is first used to pay off your mortgage, then the equity loan.
If your home has dropped in value, there may not be enough money left after your mortgage costs to pay back the equity loan.
If this happens, you won’t have to pay back the rest of the money owed on the equity loan."
This is how 'the mechanism' worked in HBD not as you have stated.
Also there are Homebuy Direct schemes where properties have been resold (Dec 2010) for 5% more than the developers price having been bought in Jan 2010 - I know as this happened to a colleague at their property. It's not always the doom and gloom you make out but I guess that wouldn't do from your viewpoint!0 -
i'm in glasgow and prices have not fallen much at all. i think this 'crash' depends on where you live. here, prices have fallen intermittently by 1-1.5% at the most since this began in 2008. mostly, they've stayed the same. (at least in any area you'd WANT to live in. plenty of cheap houses in places where sword fights in the street are nightly affairs)
anyway, not much of crash major crash here. some areas have seen rises.0 -
50% shared equity £73,750 http://www.rightmove.co.uk/property-for-sale/new-homes/property-17873433.html
Open market £130,000 http://www.rightmove.co.uk/property-for-sale/property-17437845.html
Both 3 bed houses on the same new estate0 -
:rotfl:i'm in glasgow and prices have not fallen much at all. i think this 'crash' depends on where you live. here, prices have fallen intermittently by 1-1.5% at the most since this began in 2008. mostly, they've stayed the same. (at least in any area you'd WANT to live in. plenty of cheap houses in places where sword fights in the street are nightly affairs)
anyway, not much of crash major crash here. some areas have seen rises.
Only over £1,000,000 off the first property shown on Glasgow's rightmove page.
http://www.rightmove.co.uk/property-for-sale/property-14311218.html
History
dateevent27 January 2011- Price changed: Guide Price £6,000,000 £5,600,000
- Title changed: Blythswood Square, Shettleston Road, Glasgow, G2 G32
- Brief Description changed: Portfolio for sale. of 75 tenanted properties were purchased between 2007 and 2009, developed for letting, furnished and tenanted. for sale valuing at £6,647,500. Subjects are of varying types / numbers of bedrooms and all are presented to an excellent standard and are offered complete with furnishings, tenants and safety certificates etc. The
- Initial entry found.
Lots of asking price reductions in Glassgows top and bottom market. I love Property Bee.
No prices aren't falling in Glasgow :rotfl::exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
0 - Price changed: Guide Price £6,000,000 £5,600,000
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