Remaining lease on shared ownership property affecting value?

martyp

Hi all,

I just wanted to ask how the remaining term of a leasehold on a shared ownership property might affect value, in particular with regards to staircasing for full ownership?
My house started with 99 years in the early 90s and in 2005 when purchased it was 72 years and with a remortgage now I believe would be only 58 years.
The valuation done by the new lender included showing the surveyor the remaining term of the lease from a conveyancer letter in 2005.
The house value was originally £110k in 2005 then valued at £150k this year at first then down to £108k by the new lender.
I wondered if the reason could have been due to the remaining lease as if I'd need to buy a new lease to sell that might be costly.
If a remaining lease of 58 years would impact the ability to sell my house, would it have any impact on the valuation for purchasing the rest of it from the housing association, e.g. have any effect on their valuation as such?

SmashedAvacado

yes, it would. As the value of your part and the housing association's part has diminished.

Lokolo

Most mortgages require a minimum of 60/70 years. So it would definitely impact the value as well as the ability for someone to purchase.

martyp

Thanks both, the mortgage offer caused problems as it quoted the value of my share as £70k (50%) yet the property was valued at £108k for the product with the new lender.
So can a lease being under 60 years potentially mean the house is cheaper to buy from the housing association then or would it not be a factor that affects things from their side? So they can't rectify the situation themselves to restore the value?

Lokolo

It will be cheap to staircase yes.

But be aware, it is going cost you a lot to get the lease back up to an appropriate term.

https://www.lease-advice.org/

The existing valuation is likely incorrect and using a set lease term, rather than the actual lease term (which is what the new lender valuation is based on).

This site may be of some help.

martyp

Excellent thanks, the house would be freehold if I purchased it outright with my housing association anyway so hope to get away from being leasehold altogether.
Will have a look at the site

PasturesNew

martyp wrote: »

... I'd need to buy a new lease to sell that might be costly.
...

You can sell it with a new lease, without buying it. You just advertise it with a new lease and get that ball rolling, with the new lease starting on completion date and the solicitor takes the buyer's money, buys the new lease, then you get the remainder.

You would have to do the sums to see if it's worth it. With the short lease you're restricted in who could buy it - and how powerful they'd feel to knock down your price further as they'd know you have fewer potential buyers and would be more likely to be a cash buyer/similar so not care whether they bought it or not as they might be a BTL buyer.

martyp

I like the idea of buying the other 50% so that I have the freedom then as well to sell to anyone for any amount as opposed to the restrictions of it being with the housing association.

Does an expiring lease then lend to shared ownership properties potentially being cheaper for buying the other half the longer you live in them? Although of course taking into account increases in property values as well.

eddddy

martyp wrote: »

Excellent thanks, the house would be freehold if I purchased it outright with my housing association anyway so hope to get away from being leasehold altogether.
Will have a look at the site

Yes - I've heard a number of people say that if you staircase to 100%, the Housing Association will automatically convert their leasehold house to freehold.

But TBH - that sounds strange.

Now your lease has reached 58 years, the house will probably be going down in value each year. Which means that the other 50% you need to buy would get cheaper each year. (So that would mean that the longer you wait before staircasing to 100%, the better.)


In the 'mainstream' property world, the cost of buying the freehold would get more expensive each year as the lease gets shorter, not cheaper.

So it might be worth checking the details with your Housing Association, to make sure that's correct.

Sirrah67

How could the lease have decreased from 99 to 58 in less than 30 years?

martyp

Sorry that might have been my mistake there as I think the house may have been built at the end of the 80s but it was definitely down at 72 years left in 2005.