Is shared ownership a good idea?

whitejohn

Following previous forum discussions I'm looking for a flat/apartment up to £100K, possibly for residents over 55 so it's quiet.

Have the cash to buy outright but noticed some with 50/50 ownership.

Never fancied shared ownership/leasehold etc. but it would leave me with more cash for my retirement and the possibility of a better property.

Male 65, no family, state pension only, no one to inherit my property.

princeofpounds

There isn't anything wrong in the concept itself. The problem is that because such schemes tend to cost less up-front money, they often involve more hidden and indirect costs. This is particularly the case because various government went through a period of almost promoting such schemes as a 'solution' to the housing crisis, which often makes people less analytical than they need to be.

Understand that the devil is in the detail and there is no 'standard' scheme; some are fine, others are not.

Things to watch out for include:

- understand how the rent portion escalates.

- understand what happens if you need to sell; does the scheme owner have first refusal or marketing rights? do they take a big commission? do they take valuation fees? are you restricted to who you can market to?

- if you need to staircase, understand on what basis that it done. again, are there valuation or other fees? strange restrictions on what you can do and when?

- Remember that although you own part of the equity, you usually have to front up all the maintenance costs. One of the few joys of renting is that this is not your responsibility.

- Restrictions on what you can do with the property in terms of modifications.

- if it is a leasehold/freehold arrangement, what are the service charges like? As a part-owner of the leasehold only, what sort of rights do you have to control the freehold management (or not)?

That's just a few I can think of off the top of my head, there are probably several other areas.

Finally, realise that the fact that it costs less money up front means that shared ownership properties are often poorly-priced. The lower cash cost is used to facilitate more leverage, so total cost of ownership over time may not be that competitive.

whitejohn

princeofpounds wrote: »

There isn't anything wrong in the concept itself. The problem is that because such schemes tend to cost less up-front money, they often involve more hidden and indirect costs. This is particularly the case because various government went through a period of almost promoting such schemes as a 'solution' to the housing crisis, which often makes people less analytical than they need to be.

Understand that the devil is in the detail and there is no 'standard' scheme; some are fine, others are not.

Things to watch out for include:

- understand how the rent portion escalates.

- understand what happens if you need to sell; does the scheme owner have first refusal or marketing rights? do they take a big commission? do they take valuation fees? are you restricted to who you can market to?

- if you need to staircase, understand on what basis that it done. again, are there valuation or other fees? strange restrictions on what you can do and when?

- Remember that although you own part of the equity, you usually have to front up all the maintenance costs. One of the few joys of renting is that this is not your responsibility.

- Restrictions on what you can do with the property in terms of modifications.

- if it is a leasehold/freehold arrangement, what are the service charges like? As a part-owner of the leasehold only, what sort of rights do you have to control the freehold management (or not)?

That's just a few I can think of off the top of my head, there are probably several other areas.

Finally, realise that the fact that it costs less money up front means that shared ownership properties are often poorly-priced. The lower cash cost is used to facilitate more leverage, so total cost of ownership over time may not be that competitive.

Thanks for the comprehensive reply. I'll get the contract and have a look for those points. I think this works slightly differently to the normal shared ownership where presumably the intention is to get you on the housing ladder with a view to buying the other share in the future. As I understand it, with this scheme you can never buy the other party out as it's a housing/care association and restricted to over 55s.
It's certainly poorly priced at the moment, I would just keep an eye on it and make an offer later. They are asking £70K for 50% share but it's probably worth £100K total.

Kynthia

Shared ownership leases often prevent you letting the property should you ever need to. Also they are a pain when selling due to the rules and restrictions, additional costs, plus the nightmare of coordinating the sale with three solicitors.

whitejohn

Kynthia wrote: »

Shared ownership leases often prevent you letting the property should you ever need to. Also they are a pain when selling due to the rules and restrictions, additional costs, plus the nightmare of coordinating the sale with three solicitors.

Thanks, think I'll give it a miss, don't really need those complications. I'll buy something outright, there will be enough complications with the management fees, rules and regulations with it being a flat.

adindas

The problem has been brought forward by other members such as hidden cost, your flexibility. etc
I just want to add a very crucial information. The shared ownership property is normally hugely overprice. Google it and and compare it to other freehold property around there. For that reason I meself will not going to buy a share ownership.

But in your circumstance:
- Male 65
- State pension only (due to this it is difficult to get a mortgage, unless you could buy a flat outright)
- No family, no one to inherit my property (this is very crucial in the decision making)

Given all of the circumstances and you do not have enough funding to buy outright, I fully believe that share ownership is certainly the best option.

whitejohn wrote: »

Following previous forum discussions I'm looking for a flat/apartment up to £100K, possibly for residents over 55 so it's quiet.

Have the cash to buy outright but noticed some with 50/50 ownership.

Never fancied shared ownership/leasehold etc. but it would leave me with more cash for my retirement and the possibility of a better property.

Male 65, no family, state pension only, no one to inherit my property.

whitejohn

adindas wrote: »

The problem has been brought forward by other members such as hidden cost, your flexibility. etc
I just want to add a very crucial information. The shared ownership property is normally hugely overprice. Google it and and compare it to other freehold property around there. For that reason I meself will not going to buy a share ownership.

But in your circumstance:
- Male 65
- State pension only (due to this it is difficult to get a mortgage, unless you could buy a flat outright)
- No family, no one to inherit my property (this is very crucial in the decision making)

Given all of the circumstances and you do not have enough funding to buy outright, I fully believe that share ownership is certainly the best option.

Yes the property is well overpriced.

I've just sold my house for £185K so can afford to buy a flat up to £100K max and then have the £85K pension.

If I were to buy a shared ownership at £70K then it gives me another £30K pension so that was the attraction but I agree it does look expensive and complicated should I wish to sell.

Think I'll buy something outright and just keep looking as I'm in no rush, maybe some better deals over the winter when the market is quieter and I'll be a cash buyer too. Meanwhile I'm touring in my caravan, for fun.

adindas

In Your case, if I were you I will buy it outright if I could find any property up to £100k. You still have more flexibility it is entirely under your control if you still want to sell it in later date. The exception of course if you could find a share ownership with very good price.

Keep in mind the life expectancy in the UK is increasing and more people are living beyond 90 years of ages. So there are high chance still around 15 years to go which definitely increase the benefit of having your own home rather then Share Ownership.

It is better to find a bungalow rather then a flat due to accessibility if people are getting much older.

I have seen some people in this forum argue that Shareownership is a scam where ordinary people, government is the looser and housing association is the winner.
I do not fully agree with this as some people have no other chance to be in the property ladder, unless thorough share ownership route. For instance due to lack of deposit

Before buying my first home I do an intensive research of buying home with share ownership, including asking people in this forum. This forum is a invaluable resources to ask ordinary people which do not have a hidden agenda. I have found from my own research that vast majority of share ownership properties are "hugely" overprice.

whitejohn wrote: »

Yes the property is well overpriced.

I've just sold my house for £185K so can afford to buy a flat up to £100K max and then have the £85K pension.

If I were to buy a shared ownership at £70K then it gives me another £30K pension so that was the attraction but I agree it does look expensive and complicated should I wish to sell.

Think I'll buy something outright and just keep looking as I'm in no rush, maybe some better deals over the winter when the market is quieter and I'll be a cash buyer too. Meanwhile I'm touring in my caravan, for fun.

whitejohn

adindas wrote: »

In Your case, if I were you I will buy it outright if I could find any property up to £100k. You still have more flexibility it is entirely under your control if you still want to sell it in later date.

Keep in mind the life expectancy in the UK is increasing and more people are living beyond 90 years of ages. So there are high chance still around 15 years to go which definitely increase the benefit of having your own home rather then Share Ownership.

It is better to find a bungalow rather then a flat due to accessibility if people are getting much older.

Thanks, yes I'm now thinking that buying outright is the way to go. Also looking at retirement bungalows, possibly less noise and lower management fees than flats.
I agree that shared ownership may be the only way for some people to get on the housing ladder and it does seem to be well overpriced.

J_i_m

For you, buying outright should represent the best solution. Remember in none shared ownership you are paying rent on the part that you don't own, which will be taking an chunk out of your pension.

pantaiema

Fully agree with this

princeofpounds wrote: »

There isn't anything wrong in the concept itself. The problem is that because such schemes tend to cost less up-front money, they often involve more hidden and indirect costs. This is particularly the case because various government went through a period of almost promoting such schemes as a 'solution' to the housing crisis, which often makes people less analytical than they need to be.

Understand that the devil is in the detail and there is no 'standard' scheme; some are fine, others are not.

Things to watch out for include:

- understand how the rent portion escalates.

- understand what happens if you need to sell; does the scheme owner have first refusal or marketing rights? do they take a big commission? do they take valuation fees? are you restricted to who you can market to?

- if you need to staircase, understand on what basis that it done. again, are there valuation or other fees? strange restrictions on what you can do and when?

- Remember that although you own part of the equity, you usually have to front up all the maintenance costs. One of the few joys of renting is that this is not your responsibility.

- Restrictions on what you can do with the property in terms of modifications.

- if it is a leasehold/freehold arrangement, what are the service charges like? As a part-owner of the leasehold only, what sort of rights do you have to control the freehold management (or not)?

That's just a few I can think of off the top of my head, there are probably several other areas.

Finally, realise that the fact that it costs less money up front means that shared ownership properties are often poorly-priced. The lower cash cost is used to facilitate more leverage, so total cost of ownership over time may not be that competitive.