Is now a good time for 1st time buyers,?

louloulouisa

Hi my daughter and her boyfriend have saved £18,000. They have seen a shared ownership property, for £68,232.50 (35%) is now a good time for them to buy? And is a shared ownership property ok?

 Thanks

cii4ps

I consider ‘shared ownership’ and ‘leasehold’ scams. Why not save longer and buy a freehold? How old are they?

louloulouisa

They are nearly 22

stampystamp

Why is shared ownership a scam? I actually think it’s a good thing if you are younger as you will have the time to advance your career and therefore most likely be able to staircase as your income increases. With my shared ownership property, once you have staircased to 100% the final staircasing includes the freehold of the building. Obviously you have to check before you go into a purchase what the terms are. For some it’s the only way on getting on the ladder as some people who still live with their parents still have to pay rent and bills. Not everyone had a family who can afford to support them while saving for a deposit. So many people look down on shared ownership and I understand it definitely has cons and you should definitely research everything before so you can make an educated decision but that’s the same with any big purchase!! Regardless of paying rent, you are still paying money towards something. You are still building up equity and gaining positive credit. 

OP, ultimately only your daughter and her partner can decide whether it’s for them. Make sure they read the information from the housing authority carefully. Read what they can and can’t do to the house.  Check they can staircase to 100%. Make sure you also research the developer. 

MaterialGirl*

I agree with stampystamp. I started out with a shared ownership flat and staircased up to 100%.  I would never have been able to buy that flat outright. Do check the terms and conditions obviously as not all SO are the same, but for me it was  a great way to get on property ladder, build up equity and have the security of a home instead of renting.

Also, leasehold is completely normal for flats and often unavoidable. Sure it would be great to get rid or reform the leasehold system, but as that’s unlikely for the immediate future, I wouldn’t worry about it as long as the lease is long enough.

cii4ps

louloulouisa said:

They are nearly 22

Impressive they've already saved up that much. Personally I'd find the cheapest rental and stick it out for longer for a higher deposit and freehold.

MaterialGirl*

I personally would recommend that they look into shared ownership. It will help them to build up equity and live in nice property they really like knowing they can stay as long as it suits them not a landlord. 

cii4ps

@MaterialGirl* @stampystamp

• Rent
• Ground rent (and increase clauses)
• Service charges
• Permission required to make any changes to the property
• Mortgage restrictions
• Leasehold extensions (and the often extortionate prices associated with that)
• Restrictive covenants
• At the mercy of extortionate buy out prices (both house and land)

You've lost your deposit, dealing with stagnating flat prices (I assume we're talking about a flat here), have been renting a property that simply isn't yours and likely will never really be. Pretty sure I've missed a whole lot of other negative aspects to this scam. Welcome to the 'housing ladder'.

csgohan4

cii4ps said:

@MaterialGirl* @stampystamp

• Rent
• Ground rent (and increase clauses)
• Service charges
• Permission required to make any changes to the property
• Mortgage restrictions
• Leasehold extensions (and the often extortionate prices associated with that)
• Restrictive covenants
• At the mercy of extortionate buy out prices (both house and land)

You've lost your deposit, dealing with stagnating flat prices (I assume we're talking about a flat here), have been renting a property that simply isn't yours and likely will never really be. Pretty sure I've missed a whole lot of other negative aspects to this scam. Welcome to the 'housing ladder'.

don't forget, even though you own a % of the house/flat, you are responsible for 100% of the repair costs. Plus when you come to sell, you will have a smaller pool of buyers

stampystamp

1) My rent PLUS mortgage is still lower than private renting in my area by a lot. So yes although I’m paying rent, I’m also paying less than I would elsewhere and building equity at the same time.

2) I agree with the service charges as they are useless but I wouldn’t say this is a scam so much as a con. My service charge isn’t that much per month.

3) I don’t pay ground rent. 

4) We are allowed to do what we want to the property as long as it’s not structural. While yes this can be annoying, most shared ownership are new build and there’s very little you would change/can change anyway.

5) Again leasehold extensions are annoying but if you manage to staircase to 100% and buy/transfer the freehold, then this won’t be an issue anymore? It’s no different than getting a leasehold flat.

6) All the properties that have been on with shared ownership resales have sold relatively fast in my area and that’s WITH the pandemic. You may have a smaller pool of buyers but shared ownership is appealing to the group of people who need it. With myself, I am planning to stay in my house for at least 10 years, it could even be our forever house given certain circumstances so the selling aspect doesn’t bother me too much.

I think its a really ignorant to say it’s a scam. For some people it’s the only way they can own a house, even if it’s only part own. I am not denying there are some negatives to it, of course there are! And maybe some buyers don’t understand the restrictions before they buy. But like I said before, some people don’t have the luxury of staying with their parents to save up a hefty deposit. And even if they did, some people’s incomes are not good enough to secure the rest of the mortgage. If either of these apply, then shared ownership is definitely more positive than private renting where your money is going down the drain every month. In a lot of private rentals you can’t decorate or put your own stamp on anything and you are at the mercy of the landlord as to how long you stay...

cii4ps

@stampystamp Well I don't know about any landlords you've experienced, there's definitely some bad ones out there, but my previous one practically begged me to stay and offered me £200 discount p/m just to do that. My current landlord hasn't changed the rent in 3 years. In both cases the involved agencies pushed for increased rent (and rejected by the landlords). Finding good tenants can be difficult and once a good landlord has found one, they want them to stay.

Either way, I'm always open to be proven wrong. I'm pretty confident that if we look at your total spend on property each month, stamp duty, deposit and other associated cost and compare that to rent cost in your town, you'd get a ROI that puts you at a loss.