Shared ownership in central London or purchase outright in Middlesex

billiepunk

Hi all,

I was wondering if you might be able to help with a real dilemma I am in.

I have recently been offered one bed shared ownership flat in central London in a very nice area (near Maida Vale). It was a great break as over 40 people applied to the council for the same property. It is currently valued at around £400,000, or which I would be able to afford a 30% stake.

However, I've started to wonder if this really might be a good investment. Flat prices in this area of London have increased year on year, but I wonder if such an expensive shared ownership property might price out other potential buyers in the future. Owning it outright is very unlikely for me too due to the whooping value.

Alternatively I have been thinking about it might be a better investment to buy a larger two bed flat just outside of London (e.g. Harrow), which I could own outright. The downside with this would be being far from work, and the fact that property prices in this area haven't changed much in the last 10 years according to Zoopla.

I really don't know which route to go down. The fact that there was such competition to get the shared ownership flat suggests I'd be mad to turn it down.

Any advice, ideas, or experiences would be much much appreciated!!! Thank you so much.

BitterAndTwisted

Don't go down the shared-ownership route no matter where the property is located, please. Especially if you can't see yourself being able to staircase to 100% ownership.

If you're thinking of buying a property to live in yourself I don't understand why you're focussing on the "investment" angle. The real investment is paying down the mortgage to 100% ownership, no matter where it is or what it is.

billiepunk

Thanks Bitter, much appreciated! In terms of the investment angle, I was hoping whichever I went for might have some returns as I'm likely to only be London for the next five years or so before (hopefully) starting a family, so would help me to buy a larger home some time in the future.

Where there particular reasons you advised against S/O if its unlikely you'd ever own outright?

Thanks very much!

princeofpounds

Another vote for the owned outright property. You will save yourself a real headache when you come to sell it on (shared ownership often has traps built into it above and beyond simply finding someone else who will consider shared ownership, such as being forced to market through a designated agent for a high commission).

The valuation gap between central london and suburbs is probably the widest it's ever been. That is not likely to remain the case forever.

Plus, having a cheaper property means that you should be able to buy your next upgrade property more quickly without messing around with SO.

Even though house prices are expensive right now, it can still make sense to buy because the financing is so cheap in real terms. 5yr fixed mortgage might be 3.4%. Inflation is 2.4%, so the real cost is only 1% (very crudely speaking).

Over time, that will help erode the value of your mortgage. It will not erode the value of your shared ownership rent.

brit1234

Avoid Shared ownership its a con, go for the bigger other one instead. Shared ownership has lots of hidden nasties and costs.

lb364

Seems like you're focussing too much on the other 40 people wanting the SO one - do you know this for a fact and so what if it is true? Just do what's best for you and let someone else have the SO one if you're better off in Harrow...

dearbarbie

another one for 100% mortgage. I moved out of central London in October from a teeny 1-bed to a 3-bed house (in Staines) and the transport is great - Harrow is similar as the Met line is well fast. Sometimes the further away you go, the better the transport can be (defo the case for me, anything linking to Clapham J and Waterloo is great) Did anyone see Location, Location, Location last night?

billiepunk

Thanks everyone for your really helpful comments. It seems buying outright is the popular opinion!

Yes I can say for certain the property was very popular. I attended an open day for just three flats and caught sight of at least 20+ other buyers - that was just day one of three open days! Such was the demand that the council had to decide allocations... Again, it does feel like I might be passing up a good thing but perhaps demand isn't a good indicator of a solid financial decision.

Has anyone had experiences of selling on shared ownership properties in London?

geoffky

When fools rush in.. Another for the whole house and not some small portion..

Hermoine

I've been living in Harrow for the last 5 years and like it a lot. Very safe and quiet, and quick to get into central london as well as the City. Schools are also very good, which might not be your concern at the moment but is useful to know/helpful when selling on.

Not sure what your budget is but nice two bedroom flats with easy access to the tube can be bought for £240k-ish.

Maybeachance

Hi, I too was considering SO for a while but ended up buying outright near St. Albans. I actually grew up in Harrow and some areas there are good. For the SO I was worried about the idea of the service charge increases as well as the rent aspect.

When I actually looked at the properties I also got far more value in a better built, older, larger property slightly further out. Another deciding point was, I have seen with friends who purchased SO, is that if they staircase to a higher percentage, it was suddenly difficult to sell as the places are aimed at those with less to spend. So unless you are going to stretch to buying it outright you'd be better to leave it a lower percentage to ease the resale.