Shared ownership disadvantages

tbo127

What are the main disadvantages of shared ownership of a new build?  From what I’ve researched it’s inflated price of new build which could make it harder to sell, harder to sell if you don’t own 100% but anything more than 40% and you only own a share. Anything I’ve missed? What concerns me most is the being harder to sell. What percentage is ideal thinking about selling later on?

Owleyes00

Yes new builds can have inflated prices. However, some shared ownership schemes require you to give first refusal back to the housing association when you sell so this is also something to consider.
You also need to think about the cost of staircasing which will incur legal fees and possibly stamp duty each time. Don’t forget that the value of the house will likely go up so it will be more difficult to afford an additional 10% 5 years down the line than it would have been at the time of the original purchase. Some housing associations have a staircasing cap which prevents you from ever owning 100% so that is something to consider and very few shared ownership buyers ever achieve this.

Also if this is a flat you need to consider the cost of ground rent/maintenance which you will likely be liable for all of even if you only own a percentage of the property and the additional rent charge can also be subject to change.

Shared ownership can work for some people but you need to read everything carefully and go in with your eyes wide open.

rik111

I am really anti shared ownership but you get none of the benefits of owning nor renting. You are liable for all maintenance issue, have none of the rights of ownership. Are going to be paying rent on top of a mortgage which will be subject to increase each year, Price to start with will be vastly inflated. Ground rent and service charges will need to be paid and whilst they might start off reasonable, they can soon spiral to large amounts.
When you come to sell, the housing association will completely control the process including the price and you will be liable for all costs including theirs plus they will load a ton of extra fees on you.
Avoid at all costs is my advice.

zenbuddhist

The landlord or housing association remains the owner of the property up to the point of the 100% buyout and the tenant can be evicted for rent arrears regardless of how much of the property they supposedly own – and without being recompensed for that payment. 

From an article in the Guardian 

Owleyes00

zenbuddhist said:

The landlord or housing association remains the owner of the property up to the point of the 100% buyout and the tenant can be evicted for rent arrears regardless of how much of the property they supposedly own – and without being recompensed for that payment. 

From an article in the Guardian 

I forgot about this one. One of the most abhorrent parts of the current housing situation. Any equity you have built up in the property suddenly amounts to nothing.

HanPop

Not all new builds have over inflated prices. We bought a shared ownership house owning 75% of it for a very reasonable price. The rent portion is lower than private rent as it is subsidised. Our service charge never went up in 6 years, it was only £10 a month. Also the housing association do not have first refusal if you wish to sell anymore (pre-emotion clause) that clause is no longer used. We ended up staircasing and owning the freehold and we never paid any legal fees as the housing association had an offer on staircasing at the time. We also made £20,000 on the property when we sold. I find that most people who are negative about shared ownership have never actually owned a shared ownership property.

tbo127

HanPop said:

Not all new builds have over inflated prices. We bought a shared ownership house owning 75% of it for a very reasonable price. The rent portion is lower than private rent as it is subsidised. Our service charge never went up in 6 years, it was only £10 a month. Also the housing association do not have first refusal if you wish to sell anymore (pre-emotion clause) that clause is no longer used. We ended up staircasing and owning the freehold and we never paid any legal fees as the housing association had an offer on staircasing at the time. We also made £20,000 on the property when we sold. I find that most people who are negative about shared ownership have never actually owned a shared ownership property.

So considering when you come to sell down the line, do you think it’s more important to look at the full market value or the cost of rent + service charge when it comes to buying a shared ownership property? 

tbo127

rik111 said:

I am really anti shared ownership but you get none of the benefits of owning nor renting. You are liable for all maintenance issue, have none of the rights of ownership. Are going to be paying rent on top of a mortgage which will be subject to increase each year, Price to start with will be vastly inflated. Ground rent and service charges will need to be paid and whilst they might start off reasonable, they can soon spiral to large amounts.
When you come to sell, the housing association will completely control the process including the price and you will be liable for all costs including theirs plus they will load a ton of extra fees on you.
Avoid at all costs is my advice.

Do you know what causes the service charge and ground rent to spiral? 

tbo127

rik111 said:

I am really anti shared ownership but you get none of the benefits of owning nor renting. You are liable for all maintenance issue, have none of the rights of ownership. Are going to be paying rent on top of a mortgage which will be subject to increase each year, Price to start with will be vastly inflated. Ground rent and service charges will need to be paid and whilst they might start off reasonable, they can soon spiral to large amounts.
When you come to sell, the housing association will completely control the process including the price and you will be liable for all costs including theirs plus they will load a ton of extra fees on you.
Avoid at all costs is my advice.

Do you think HTB is better? 

amandacat

My first house was shared ownership, it was 6 years old so was a resale. 

I probably paid slightly more than if I’d bought it on the open market and again when I staircased to 100%. 

It got me on the housing ladder at a time when I couldn’t afford a mortgage on a whole house, I owned 40% and rented 60%. I was lucky that service charge and rent stayed reasonable. 

I staircased to 100% and got the freehold after 5 years. I was able to sell on the open market because unless it’s still shared ownership the housing association don’t need to be given first refusal to buy anymore. 

Main disadvantages were I built 60k equity between increase in price and repayments over 10 years living there. Had I mortgage it all from the outset then I would’ve come away with a lot more. 

The housing association had put some restrictive covenants on the property which the new buyer had to agree to, luckily they still bought it but it could’ve put some buyers off. 

I don’t regret my first house being shared ownership. 

Doodlebugs

HanPop said:

Not all new builds have over inflated prices. We bought a shared ownership house owning 75% of it for a very reasonable price. The rent portion is lower than private rent as it is subsidised. Our service charge never went up in 6 years, it was only £10 a month. Also the housing association do not have first refusal if you wish to sell anymore (pre-emotion clause) that clause is no longer used. We ended up staircasing and owning the freehold and we never paid any legal fees as the housing association had an offer on staircasing at the time. We also made £20,000 on the property when we sold. I find that most people who are negative about shared ownership have never actually owned a shared ownership property.

Completely agree with this. Our shared ownership was one we could staircase to 100%. We bought a 35% share initially and our mortgage, service charge and rent on the part we didn’t ‘own’, was cheaper than renting a similar property. Our service charge went up once in 6 years by <£5 a month and our rent went up annually, but again only a minimal amount. Definitely research the housing association, there are some good ones out there.  

We staircased and bought the freehold, sold on the open market at a price we chose and made a decent profit. Would never have gotten on the housing ladder without shared ownership at that time in our lives.