Shared ownership/equity is a scam.

Orpheo

and_another_thing... wrote: »

I'm so glad this thread has reappeared as last week I had my Shared Equity flat valued. I know estate agents tend to inflate property values and that a place is only worth as much as it sells for at the end of the day but three separate agencies have said they would market my flat at between £35000 and £40000 more than I paid for it in 2009. When I bought my flat a stipulation was that I HAD to have a deposit though it wasn't as much as if I was buying 100%. I paid 15K then as a deposit and have obviously not lost that as not likely to be in negative equity. I am considering selling and buying with my partner and if I hadn't entered into a SE scheme when I did but carried on renting I would not have as large a deposit to put towards our joint purchase. With our two salaries my partner and I will be in a position to buy on our own.
Of course I may just decide that I prefer living on my own for the time being anyway!We'll see.
Not boasting just presenting a positive view as always.

The EAs certainly figured out how to win your business. Boast after you have sold for £40K more. Otherwise you may end up with egg on your face.

Curious_Yellow_2

Shared ownership certainly looks attractive in London, on paper anyway.

The one I looked at was geared towards people living in the area with a combined income of less than £60,000. It looks great on paper. You pay less in rent + mortgage + service charges than you would renting a property in the same area. If you're smart, you save the difference while you live in the property, take on full ownership, sell up when you want to move on and you either take the hit if prices fall, or take the profit if prices rise.

We queued up on a Saturday for an hour, only to be told that all the properties we were interested in had been snapped up during that time. They must have been people who'd done their research and knew exactly what they were getting into, or people who met the requirements and were first in there.

There were 18 properties varying between studios and 3 bedrooms available at costs from £189,000 - £318,000. The 3 bedroom and studios still remained while all the 2 bedroom and 1 bedroom places were gone. The people queueing seemed to be professional couples, single child families and people on housing benefit who were looking to move away from their current places. Despite reading through the glossy brochures several times I could not understand how the scheme worked. There was no mention of whether rent was variable or linked to an index or to the valuation of the property, what we as tenants were and were not allowed to do, and the details on selling up if you didn't own it 100% were extremely vague.

The problem in London is people are desperate to get onto the housing ladder. I don't blame them. Rent feels like throwing money into a black hole. Any alternative that potentially lets you hang onto some of that money while standing to make a profit in the future will definitely be welcomed.

I am still not entirely convinced shared ownership is a scam, but it's certainly not the option to take if you're someone on benefit who could potentially not be able to afford to live there if the terms in the fine print made it so eventually. Ditto for someone who knows they'd definitely want to move out in 2-3 years but won't be able to take on full ownership of the property in that time.

I'll probably carry on renting and saving to get a mortgage on a property outright but the lessons here seem to be that shared ownership can be a great option if you know for sure your circumstances will permit you to take on full ownership of the property and allow you to dictate when you'll move out, and your house is not a magical £1 coin-sh*tting box.

HAMISH_MCTAVISH

Egg_custard wrote: »

A fair number of people on the thread have said that SE/SO are keeping house prices propped up. I don't think house prices are that high at the moment - the 'bottom rung of the ladder' houses seem to me to be as affordable in comparison to wage levels as they were when I bought my first house nearly 15 years ago.

The difference is the increase in the percentage deposits required, and the banks' general caution in lending. SO/SE has become more popular because it helps to reduce the amount of deposit required. For a FTB at present, the monthly mortgage repayments are not such an obstacle as getting together the initial lump sum. That would've been a big problem for me 15 years ago if I'd have needed more than 5% deposit.

If house prices are being 'propped up' there's probably more winners than losers out of it. There's already a large number of homeowners in negative equity due to buying at the peak of the housing market. If prices fall further, negative equity will become a much bigger problem than it is now. Existing homeowners stand to lose more through prices falling than FTB wannabes lose as a result of prices stagnating.

Excellent post. Well said.:T

ukcarper

Orpheo wrote: »

The EAs certainly figured out how to win your business. Boast after you have sold for £40K more. Otherwise you may end up with egg on your face.

According to Land Reg the average London flat has increased by £35k since Feb 2009.

brit1234

Egg_custard wrote: »

A fair number of people on the thread have said that SE/SO are keeping house prices propped up. I don't think house prices are that high at the moment - the 'bottom rung of the ladder' houses seem to me to be as affordable in comparison to wage levels as they were when I bought my first house nearly 15 years ago.

The difference is the increase in the percentage deposits required, and the banks' general caution in lending. SO/SE has become more popular because it helps to reduce the amount of deposit required. For a FTB at present, the monthly mortgage repayments are not such an obstacle as getting together the initial lump sum. That would've been a big problem for me 15 years ago if I'd have needed more than 5% deposit.

If house prices are being 'propped up' there's probably more winners than losers out of it. There's already a large number of homeowners in negative equity due to buying at the peak of the housing market. If prices fall further, negative equity will become a much bigger problem than it is now. Existing homeowners stand to lose more through prices falling than FTB wannabes lose as a result of prices stagnating.

HAMISH_MCTAVISH / Egg_custard how many false/ duplicate accounts have you created now, it smells of desperation.

One of my friends with a shared ownership flat is having difficulty because they have had a child and need to move to a bigger place. Shared ownership has this made this far more difficult and costly, they are pretty much trapped in a flat that is too small.

Another story was a much published flat on a certain Kirsty Allsop show. Where she bragged about how good the scheme she did not mention the neighbours. New developments by law have to have a percentage of social housing. In this development you would be paying a fortune to live next door to some of the most violent anti social people in the area. I won't name the block but it has made the decent residents lives hell.

brit1234

ukcarper wrote: »

According to Land Reg the average London flat has increased by £35k since Feb 2009.

I think you will find that figure highly distorted by central London luxury flats and shared equity projects.

I servilely doubt that is the case of flats in the suburbs especially west London.

Orpheo

ukcarper wrote: »

According to Land Reg the average London flat has increased by £35k since Feb 2009.

I would suggest that the £35K is the average and not the flat. If the reverse is true then please describe how the 'average London flat' is calculated.

sturgeon

Orpheo wrote: »

You are not an intelligent buyer. You bought half a house.

Yes I am. I was paying almost £800 rent and now paying half that for a property that will almost certainly increase in value. Already there has been a sale of a property the same of mine for £25k more than I paid. Plus, if the property did go down in price, it was also a good buy as unlike most home owners, I do not need to cover half the negative equity. As it's covered by the scheme.

Additionally, desire for this kind of property in the exact location in this area of east london is sky high, and has been since I started renting here 3 years ago. If I didn't use shared ownership I wouldn't have been able to buy, like most others. And the fact I did use it has already proved to be an excellent investment.

Trolling with one-liners isn't going to cut it.

sturgeon

PasturesNew wrote: »

Short version: Single bloke working in London buys SO place and believes his salary will go up in 5 years and he'll still have a job/a better job and will have saved up a deposit to move on .... before the rent rises kick in in 5 years' time.

In 4-5 years the rent becomes 3% of the then value. So, if your place DID double in value, and if your salary didn't increase, would you be up !!!!!! creek without a paddle? I've no idea of your share/value, so can't guess the figures.

Most problems come due to change of circumstances and having to move ... and a lack of buyers who can meet criteria/borrow.

Oh - and yes, I bought a SO once, an early prototype 20 years ago... 7 years after buying it (peak prices) I sold it (just after the bottom) and was still in 5% negative equity, which I had to pay in order to sell. Of course I had no idea there was a house price crash on back then as there wasn't the media that there is now, just 2 short news programmes on a portable TV twice a day if I watched them.

Well as positive as I am about the scheme, I don't think I'll be seeing the property double in value over 5 years. In that extremely unlikely circumstances, that 3% is almost £400 a month. Although that's a lot, it's not out the realms of affordability. And thankfully (and touch wood etc) I am doing OK in my job and I should certainly see several salary increases in the next 5 years due to the stage I'm at.

I don't plan to 'get out' before the rent rises. I hope that by the time it reaches the full 3%, as it makes more economic sense to get a mortgage for the full value, I should hopefully be at a stage to do that and buy the other share outright. Effectively I have secured 50% for the price I paid initially, so if the value does go up significantly (affecting my affordability to remortgage to buy the other share) then I'll just have to wait a little longer. If the % kept going up year on year, and went up to 5% or more like other schemes, then I would feel an urgent need to get out.

As I've alluded to in previous posts, I'm fully aware there are issues selling some shared ownership properties as you can only sell to others on the scheme. On the FTBI scheme (now defunct, unfortunately) you can sell on the open market just like any other property, you're not selling your share.

Mrs_Arcanum

There are as many winners as losers with shared ownership schemes. If you bought in a rush in the heady excitement of getting a place of your own with the wrong mortgage you could be a loser. However if you made a considered purchase with the right mortgage and staircase carefully you are a winner. The vast majority of shared owners where we work are very happy indeed.