Shared ownership Apartment £50,000 ?

toomsie

I am considering shared ownership on some cheap apartment in Sutton. I like the thought that they don't appear to ask for much deposits and it is a new build. I don't really like old builds as such. I don't earn much put it appears that the average person going into shared ownership earn about £25,000 a year.

Any Anarchists or libertarian point of view welcome.

bluesnake

A mixed bag of thoughts here. I am of the viewpoint that they often are a bad deal.

They are usually priced over the market value. The once I looked in the newspaper, in my eyes were over valued by 10-15% compared to other surrounding offerings.

They may be only salable to a certain group of people like Key Workers. This may make it very hard to find a buyer.
Eg 1. We had one Key Worker that bought a 30% share in Chelsea with river views. Six-ish years ago he wanted £650k for this one bed flat. I am not saying it is impossible for a Key Worker to come up with that money or find a mortgage, but feel that his market was very limited.

Eg 2. about nine years ago looked at a 3 bedroom house. The owners defaulted. It had wood floors through the lower lounge and dining room. Every room had cages in it and the lounge and dining room had many - large dog size. Fly paper was hanging up. The place was disheveled inside (rightmove photos) and outside (walked past), it needed thousands in work. Turned out to be a Shared Ownership, 25% for £87k. You had to be a Key Worker, must work locally, and have either 2 or three kids - can't remember which, and your earnings had to be under 22k. The words 'slave to the grave' and 'entrapment' came to mind.

If the property devalues or you are forced to sell within the first few years of purchase (100k), sale price might be less than purchase price (80k), and you may have to make up the difference (20k of which 10k gets paid to the other party to compensate their loss) from the purchase price, possibly leaving you in debt?

Now if the other party value your once 100k to 140k, but you are a slob, or have issues, or ex-partner pocketed the money instead of paying and has done a runner, or remortgaged in your name, etc. (now your 140k property has 20k of charges), and it only sells for 80k, leaving you 60k in the red.

Although you pay half a rental, you will probably be financially responsible for majority? of the cost of general maintenance work and decoration

Hopefully your scheme allows you to buy a continually bigger slice of the property, which you may buy when they allow you to buy.

Anything you do to enhance the property will only gain you a say 50% increase in revenue.

You are never really the owner until you buy outright.

You still have to pay rent which is about 3% of the unsold equity, and it probably will go up every year - 10% increase this year in Sutton (London). At this rate expect you rent to double every 8 or 9 years. A mortgage may be cheaper than 3% and stays relatively constant.

The company may determine the market value via their calculation, rather than real world ones. Guess who makes up the difference? Not their fault you cant sell at their valuation price. In a hurry, job is moving you elsewhere and you need to sell fast?

If your circumstances change, you may not be allowed to rent it out, have a lodger, or BTL.

Shared ownership is often a 'block building', rather than stand alone or semi, these 'social housing' blocks will often not increase in value, or be as sought after as private housing. May get a bad reputation as some currently have.

Making a 'poor door' entrance, if the housing is mixed is not uncommon. You may have to tell your friends that they can only gain entrance via the 'poor door' around the back, rather than the flash front door.

Need to read that agreement professionally so YOU unserstand, weasel words may abound!

On the positive side, it is the only way some people can get onto the property ladder. I would say it is better than renting - but service charges!!! If you can buy you way in within a reasonable time, and you can afford too, or your career takes off increasing your earnings then it could be an ok way to buy. I met a nurse, and some 23-ish years ago and she was on about 16k, some 7 years later she made senior management and was on about 43k (around 1997), she said it was a great for her

***********
Generally avoid high rises and places with lifts, as maintenance can be killers on these, especially as they get older. Lift maintenance is not cheap, some sods may break them, do number ones and twos in them, and when they break down, it is a long way to climb up with shopping for many weeks or months. In 2000 it was calculated generally that each lift added £2500 per year in extra maintenance charges.

Service charges : best sell your flat from new in year 9. Year 10 the builder structural warranty runs out. The Owners are allowed to charge a maximum of 12K for major works every 5 years and you may have to remortgage if you do not have the cash. If the building shared, lots of wear and tear may take place. Older it gets, more it costs. Taller the building, more it costs.

The management company often add a 10% management fee.

Some owners have their own maintenance company that bills the management company and so write their own cheque which you have to pay.

toomsie

I understand why I was happy to live a room at £320 instead buying a home as an investment.

You also forgot to mention the coming recession.

kimbyanne

There is always a fair amount of "hate" towards Shared Ownership on here, many people think its a bad idea.

However, it does work for some people and I am one of those people.

I would say, don't bother with S/O if you are in it for the short-term, such as you think you may want to move within a few years. S/O works far better if you are intending on being there for a long time and plan to staircase up to full ownership.

Yes, you are responsible for all repairs as you are treated in exactly the same way as a normal homeowner. I don't have a problem with it, our house is a new build so problems will be relatively minor in the beginning and I have taken out insurances for electrics, pipes, boiler, etc.

The person who said S/O are usually block built, that obviously depends on where you live. Our S/O is a very spacious two bed semi detached, on a very large plot, in a nice area. We have our own driveway, front garden, etc.

Our rent is low, as we purchased a large percentage. Yes, it will go up no doubt but its capped so it cannot go up huge amounts each year. We intend to staircase to 100% within the next two years anyway.

You can pretty much do what you want to the property, obviously apart from structural changes.

I also found the prices to be a bit lower than market. Our house was £165k, which I think is quite good. We had been looking at new build two beds for £180k.

Mallotum_X

toomsie wrote: »

I understand why I was happy to live a room at £320 instead buying a home as an investment.

You also forgot to mention the coming recession.

Fortunately we are just coming out of recession, the next one could be 10 years or more away so plenty of time to prepare.

Pixie5740

I agree with kimbyanne. S/O can work if you go in with your eyes wide open and are in it for the long haul. If you think that you will be selling up or moving in under 5 years then S/O probably won't be suitable for you.

You don't buy a home as an investment you buy it to be...er...well your home. Only you can decide whether you want to continue renting a room for £320 or renting a whole property or buying somewhere be it with S/O or otherwise.

Out,_Vile_Jelly

You need to read the small print very carefully and think about how long you will be staying in the property, and what your options are if you needed to move quickly. Shared ownership works for a lot of people until they try to sell. There seems to be a lot of flat building in Sutton at the moment and when you want to move there may be a load of identical, no-longer-new properties to compete with.

bluesnake

To be fare I live in London. Often councils here sell/lease/give their ageing, delapidated estates to developers, on the proviso that a certain amount of social housing units are built. Usually these must have the exact same amenities and sizes as the non social housing. However the building is often split internally, and the amenities, fittings, finishes and entrance are different.

Just google 'poor door london' and http://www.vice.com/en_uk/read/londons-poor-doors-defeated-by-anarchists-910

Ah toomsie, the impending recession. I guarantee you there will be one. I also guarantee there will be times of growth too. I have seen houses go down in price, however over 15-20 years very very few people have lost, many have doubled, if not quadrupled their initial investment, what ever and however they bought it. On paper you become rich, but in reality you are not. The trick is keep it long enough, keep up the repayments, and do not have any negative character traits - especially arson.

People can benefit from this. Many find it is the only option, and some are lucky to have this option. I know people at work that would love this option, but are not Key Workers. The most successful are often the people that do overpay and tend to be climbing the corporate ladder.

Most times, buying sooner is far more advantageous that buying later, and the only real way of knowing if this is the time is to look back after 10 years and think 'yeh, I should have bought two '

toomsie

Thanks very much for your time guys. bluesnake, I am not a punk Anarchist. Those Anarchist on that site are against capitalism, I am against government manipulated capitalism. In this case its the low interest rates that steel from the greater economy and gives speculators and if you are lucky home owners.


I might will give this thing a go but I do expect a vicious recession down the line. I probably can't get everything done in a month so I will probably have to find a place to rent in meantime.