Shared ownership/equity is a scam.

rxbishop

I pulled out of my shared ownership buy mentioned on the previous page, on Friday. Made a few enquiries with the company (Raglan - are they infamous?) and it is £250/month (120 rent on 20% of the property and 130 maintenance). f that, can buy 45k of mortgage for that. Pd off with the EA as they told me 180/month, god they p me off, wasted loads of time talking to mortgage guys and solicitors and stuff, still didn't cost me any money thankfully. Cheers for everyone's advice on here. You live and learn.

huggermugger

I bought 50% of an existing shared ownership house after a relationship breakdown, 12 years ago, leasing the other half from the local Housing Association. It was valued at 185k by a local EA, capped at £165k by the Housing Association (who said it was overvalued), I have a small mortgage as I chose to put all my capital into the house. The rent on the 50% lease is £211 per month and rises by about 3% a year. I have paid a service charge of about £30 a year for the last couple of years as a contribution to grounds maintenance on the estate.

I live in a lovely 4 bedroomed house on the edge of a town, overlooking fields and surrounded by woods in a very expensive part of the South East. If we hadn't been able to buy this, I would have had to chose between living in a 2 bed house (not big enough) or uprooting my kids from their schools and friends, when they'd already had horrendous disruption. The estate was mixed housing association/shared ownership although many people have since exercised their right to buy or staircased. The houses sell for good prices (although a bit less than comparable others due to the proximity of Housing Association properties...) and usually very fast (particularly the shared ownership ones). The prices have risen and then dropped a bit in common with the rest of the market here - last one sold for £249,950 5 months ago.

The only scam I sighted when I bought this was the mortgage broker asking me why I was buying half the house when the size of my deposit meant they would give me a mortgage for 100%. The repayments would have left me £200 a month to live on... Actually, it wasn't a scam, just very poor advice, which I chose not to take.

And yes, I am old enough to remember 15% interest rates and negative equity; I had a flat in London at that time and we lived in one room and rented out the other in order to pay the mortgage. But I didn't get into negative equity because I put down a decent percentage. Again, I was encouraged to buy a more expensive property or take a larger mortgage. Again, I declined because I am allergic to risking the roof over my family's head.

Shared ownership has worked for me in every way and the story is the same for all the other people I know on my road (which is most of them...). I suspect many of the shared equity schemes on new build developments aren't a good deal and encourage people who actually can't afford a house to believe that they can. But most new builds are grossly overpriced imho and don't hold their value, particularly in the short term. Leasehold flats, shared ownership or otherwise, can be a minefield and agreements should be scrutinised very carefully.

So as ever - caveat emptor. Imo buying an existing shared ownership property is better than buying a new one, particularly because (in this area at least) the old leases were better than the new ones - lower rents and lower yearly price increases.

That's my 10 pen'orth!

brit1234

Discussion about advert encouraging people to get a shared ownership property at 16 times their annual salary in the Evening standard.

https://forums.moneysavingexpert.com/discussion/comment/43944584#Comment_43944584

How many people will fall for this stuff?

sturgeon

Still perplexed by these threads. Some shared ownership schemes are bad value, if you look into it properly you can get a very good deal. S/O worked out very well for me, I've posted the below previously. I do find it odd how ferociously people like 'PoppySarah' (who I envisage to be middle aged and very depressed) spend so much time on here randomly trying to stop people looking at this option.

I'm in my early twenties and have a decent job. I've been renting by myself for a few years, paying quite a lot monthly. I wanted to move closer to London as that's where I work and usually go out socially, I used to live pretty far out (Watford) and it took ages to get to work and there was no way of getting home after the trains had stopped, spare a v expensive taxi.

When I moved into an area east of London (zone 4, about 20 minutes into central on the tube and a bit less on a train) I rented for 6 months and noticed a nice new block being built opposite my flat.

After enquiring in their sales office, though it was meant to be a very vague enquiry, they showed me a property and explained I could buy it under the First Time Buyers Initiative.

This scheme lets you buy minimum 50% of a property at allocated developments, and you will staircase to buy the remainder as and when you can. There is no rent from day one, however after 3 years you pay 1% yearly of the value of the share you don't own, rising to 3% after 5 years.

A lot of posts here have discussed how such properties have prices that are non negotiable, are the worst flats in the development, are tiny etc. Couldn't be further from the truth. This is a very roomy one bedroom flat, very well built and well sound insulated (can NEVER hear neigbours nor do they hear me) and I'm on the top of five floors in my block. The location couldn't be more convenient as it's a 60 second walk to the tube stop for a 20 minute ride to central London.

After looking at net house prices since I bought it, it shows that out of every property on the development (271 flats), mine was one of the three bought at the lowest price. This is because a few buyers for my particular flat fell through (qualifying and going through the FTBI process IS a nightmare and you can easily fall at a hurdle) and they needed to shift it. Also, when the valuation came in £10k short of the final agreed price, there was a lot of negotation and waiting until they finally dropped the price further. So I'd be interested to know why the fact this is a FTBI home has 'artificially increased prices', seeing as I negotiated as hard as I would if I were a cash buyer? The fact it was on this scheme made no difference and I got it ridiculously cheap. Market values in this area are £170-180k plus for flats that are 4-5 years old (and were 'new builds').

Rather than me paying £700/800+ to rent a one bed flat in a similar area, I'm paying around half that for my mortgage which is unbelievable. This puts me in the position to save up my excess disposable income to buy back the shares I don't own. It also leaves me in a position where my increased salary should let me re-mortgage for the full property value.

The reason they charge rent after 3 years at a small amount, rising to a larger amount after years 4 and 5 is because they hope by this time you'd be able to buy back shares. Otherwise they hope your salary will have increased sufficiently after five years to be able to afford a home outright, and have built up a good deposit from your tiny mortgage.

So for all you naysayers, this scheme has allowed me to buy a very nice appartment, in a very good location and by a lot of luck allowed me to get it at an incredibly reasonable price. Far better than any other one bed appartment I've seen in greater London, including underground parking and even ignoring the location right next to a tube station. The fact it was on a first time buyer scheme hindered me in no way to negotiate the price like any other buyer would be able to.

So considering I could not afford a home outright, this is clearly a fantastic way to enable me to buy a property and have my money go somewhere, rather than splash out double the mortgage I now pay to pay off my Landlords mortgage.

One thing I am aware of is that some other first time buyer schemes are NOT the same, and require rent to be paid from day one. These schemes I don't think are so good, they like advertising them in London newspapers and usually only allow you to buy 25/30% leaving you with a decent mortgage amount of about £400 a month, however £300+ rent a month from the day you move in. Plus they do seem overpriced at £200k+ and I'm not sure if as with my situation, you can actually get the price down to meet the valuation.

Finally, although I may be naive and wrong, I feel the value of the property can only go up. As the best priced property of this type I've actually seen, after the final price I nabbed it for, I feel even if I sold today I'd make money on it. Especially considering the developer finally won their battle after the valuation was £10k short of the agreed price...as literally the day after I moved in, my mortgage lender advised me the valuation had been revised at £10k more (after about 2 months of the developer arguing). It's on the doorstep literally of a £5m regeneration of the town centre that has just happened, and is about 12 minutes tube ride to Stratford, which is obviously the Olympics location. Plus the biggest urban shopping centre in Europe will be finished there by this September, a new Westfield.

Unfortunately the First Time Buyers Initiative, which seemed from all my research to be the fairest scheme of them all, is no longer available. I can't find any schemes where you don't pay quite lumpy amounts of rent from day one anymore, plus the properties do seem well overpriced.

poppysarah

sturgeon wrote: »

I do find it odd how ferociously people like 'PoppySarah' (who I envisage to be middle aged and very depressed) spend so much time on here randomly trying to stop people looking at this option.

I'm in my early twenties and have a decent job.
Unfortunately the First Time Buyers Initiative, which seemed from all my research to be the fairest scheme of them all, is no longer available. I can't find any schemes where you don't pay quite lumpy amounts of rent from day one anymore, plus the properties do seem well overpriced.

Middle aged (Hmmm what are we calling middle aged these days?)
Am not depressed at all.

I post against shared ownership because I truely believe people who take it up are being conned.

Not being able to afford a house even if you earn "decent" money says to me the system is very broken. And using schemes to continue to prop it up don't help anyone.

sturgeon

Ok then. So from the details of my purchase above, do you believe that was a con? The vast majority were bought by those using a more traditional method (full mortgage), so as all of the 271 purchases went through for more than my flat (bar 2) then were they all conned too? Bearing in mind only the minority of flats were allowed to be sold through the FTBI. Mine is a clear case where I clearly have not been scammed.

Yes I pay 1% rent of the % I don't own after 3 years but that's fair, seeing as I've only bought 50% of it. The aim is to remortgage for the entire value in 2-3 years or so, otherwise staircase. The service charge is steady and is heavily monitored by a very strong residents group within the development so that's not going to ramp up either.

poppysarah

The con is also partly due to you propping up the housing market - as well as the finer details of the scam .. sorry scheme...

Idiophreak

poppysarah wrote: »

Not being able to afford a house even if you earn "decent" money says to me the system is very broken. And using schemes to continue to prop it up don't help anyone.

I quite agree that the system's broken, but I don't feel shared equity (forgive me, I don't know so much about shared ownership) deserves much of the criticism it's received on this thread. Fine, it may, over the whole of the market, serve to keep prices higher than they would otherwise be....but then, so does buy to let, so do second homes, so does, basically, greed from developers. There are plenty of problems with the market and shared equity makes only a tiny contribution to these issues.

I think in order to see the value of shared equity, you can't look at it on a market-wide scale, you have to look at it on a per-case basis. I went to see some friends last week who've just bought their first flat on shared equity. They'd had their last 4 rental places sold out from under them, were tired of being constantly moved on - and desperately wanted to buy for a little stability. Now they're in a flat they love, much higher spec than their previous place, paying roughly the same each month and they've 10 years to move on, or to save the builder's contribution. Sadly I don't know enough about their area, the prices etc to know whether there's is a good investment longer term.

We also bought shared equity. In doing so, we pay £300 less in mortgage than the flat next door rents for. We paid less than anyone else on the development for comparable properties (yes, the sale prices have been published online, thanks - some sold for 12.5% more than ours) and we were, as far as I know, the only ones to use the shared equity scheme. We also had first pick of the properties, so ours is the biggest and best in the development. I bought in Q1 2009 - which felt a bit like the bottom - and I'm pleased when I see things like Hamish's graph that support that.

Any concerns I have about the resale value of the property are purely down to the issues selling any new build, the Shared Equity scheme doesn't worry me at all.

In terms of how this helps us, immediately - it's allowing us to save for a nice wedding relatively easily (as we bought on shared equity as well as putting down a small deposit, our mortage is currently only a 2x multiplier), it enabled us to pay for fittings, fixtures and furniture quite comfortably...In the mid-term, I expect we'll look to sell after 5 years in the place, by which time we'll have had a chance to save a little and will move out of town to somewhere cheaper.

The alternative would have been for the two of us to rent for 10 years and save toward a deposit.

Whether it's a con or not depends on one simple thing - how much you pay for the property in the first place - and that's just down to common sense. If you know what the place is worth, do all your comparables and can get it for the right price, it doesn't make a lot of odds if you pay with shared equity or not...

Anyway, that's my 2c - bring on the flaming

sturgeon

poppysarah wrote: »

The con is also partly due to you propping up the housing market - as well as the finer details of the scam .. sorry scheme...

See, you don't have much of a point there.

My first time buyer scheme clearly did not scam me whatsoever. It's massively benefitted me, my mortgage is tiny, it's allowing me to save to buy the rest of the property without having to pay someone elses mortgage. It's a great flat, very good location and it seems highly likely that besides the main benefit of having a nice place to live, that I will profit when selling.

It just seems you're bitter that in your opinion first time buyers using these schemes are keeping prices artificially high. Well I'm sorry, but without first time buyers and new homes, the property market would be significantly more static.

I bought my home two years ago and remember you trolling here then, you've clearly got a massive bee in your bonnet and you need to get over it! In your lifetime these shared ownership schemes will not go away. If you're an intelligent buyer, you'll seek out the very few first time buyer schemes that genuinely will benefit you after doing thorough research like I did. If you're stupid, you'll be blown away by the 'buy 25% of a brand spanking new home only 35 minutes train journey from liverpool st' advert. Then be roped into very hefty rent charges from day one, and won't be able to sell on the open market.

Why not aim your rants at those people? You've run out of steam

brit1234

It is clear these schemes are designed to keep prices high.

See builders can't sell new build first time buyers homes any more as they are too expensive now and they don't want to drop them. So they sell them off as shared equity/ownership to keep the prices up.

Being a key worker I have enough job friend horror stories to steer well clear of these scam schemes.

The reoccurring themes are lack of flexibility and extra costs.