Making Offer for a Shared Ownership Scheme

SerenaGoode

chappers wrote: »

People are desperate to get on the housing ladder but shared ownership is surely making a sensible decision only borrowing what you can afford. Making unwise decisions is to just say right buy the lot and lie on a self cert.

Do you honestly believe that the prices of any property are going to fall so significantly that they aren't going to recover over the lifetime of a mortgage.Even usingyour own reasoning look at what has happened to house prices since the 90's crash.
Buying part of a house has no more risk attached to it than buying the whole thing if you bought all of your 250K place and it dropped by 50K you would still have to pay the 250K.
I find it quite alarming that we are hearing of everything from small rises to 45% devaluation over the next 5years. As I said on another thread a lot of this is stirred up by the financial media sensationalizing, unfortunately the housing market and the performance of the economy is partly run on sentiment, confidence primarily and so some times these reports of doom and gloom have a habit of becoming self prophesising.

Listen, I'm not a house price crash obsessive, I think anything is possible from further rises to stagnation to significant falls. I've often advised FTBs that the risks of buying are not as great as they are made out to be, so long as ou are buying somewhere that you can live in long term and can afford the payments.

I do take issue with the idea that reports of doom are self-propesying - that's just sily, the problem is that prices are too high, not that people are talking about prices being too high.

But, I am arguing in this case about the specific situation. Shared ownership is in general not a great scheme, I have heard far more bad stories about the outcome than I have good ones. And the flat seems to me horrifically overpriced - buying a %age of a property is only a good shortcut if the property is correctly priced. but the most overpriced part of the market currently is the new-build apartment area. even the poster points out that this flat is £90K over the cheapest 2-beds in the area. I don't think owning at all costs is the solution. in this case I sincerely think he should save and wait a bit longer. He's only 24, it's extremely unlikely that prices will go up a huge amount this year or next, and he is likely to see far better opportunities in the future.

Shared ownership can work although it is a scheme that tends to get rolled ou when the housing market is overpriced. But shared ownership of an overpriced apartment that is likely to lose value regardless of what happens to the market overall isn't a good solution.

He's paying £1200 a month currently. For that he could buy something better and cheaper further out - or he could rent something for £800-900 amonth or so and save the rest towards a deposit.

PasturesNew

I bought a SO at the height of the last bubble. So about 1988/89/90 (you'd think I could remember, but old age is kicking in!)

For me it was great because I never had to buy the 2nd half (probably would never have been able to either) but for me it meant it was mine by virtue of the fact that I could not be moved on so long as I kept paying the mortgage and the rent. A home for life.

I sold it in 1997, having to write a cheque out to cover the negative equity.

I'd do it again if it were the right deal for the right place. i.e.if I truly believed that I wouldn't want to move again and this was my only way ever of getting a house.

I'd also do it again if I could buy just 10% and leave it at that! To me it would be like a tenancy for life and the rent portion is usually cheaper than the mortgage. So quids in.

Generali

I'd be very dubious about spending that much on a 2 bed in the East End. You can get a 2 bed in Riverside Mansions in Wapping for less than that (old private block, not LA).

SerenaGoode

PasturesNew wrote: »

I'd do it again if it were the right deal for the right place. i.e.if I truly believed that I wouldn't want to move again and this was my only way ever of getting a house.

Fair point - I think it generally works better for that than as a 'step onto the property ladder'. It was originally designed for people to move out of council and HA places into something they at least had some stake in, and was a good scheme for that. I think it's less effective as a solution to FTB problems in an overpriced market, and I think the risks of losses on apartments could hardly be higher.

SerenaGoode

Generali wrote: »

I'd be very dubious about spending that much on a 2 bed in the East End. You can get a 2 bed in Riverside Mansions in Wapping for less than that (old private block, not LA).

Yes, at the heart of it, that's my worry. It's so overpriced compared to all sorts of property in many areas of London. Part-owning doesn't solve that problem.

PasturesNew

For the record, after 9 years of living in my SO, I still had to pay 4.6% of my original stake on a 50% share to buy myself out of the negative equity. If I hadn't been able to just write a cheque out I'd have been stuck for another year or two.

Location was just north of Cambridge.

Crashes last a lot longer than people think.

macaque_2

Bombata

I would prevail on you to think very hard before going ahead with this deal.

For start, it is a 3 way split which seems an odd arangement for a 2 bed flat. If one party gets into financial difficulties, things could go pear shaped for everyone. On the human level, the scope for friction in a 2 bed flat with 3 owners seems limitless to me. Lets face it half the population can't even stay married these days.

Where there are problems in a shared ownership scheme, the easiest solution is to sell up. A forced sale in the current market however could be very painful indeed. Quite apart from anything, the credit crunch is going to have a serious impact on London jobs over the next 18 months.

By all means buy a home for yourself but I would strongly recommend that, in these uncertain times, you have as few co-owners as possible (and ideally none).

Generali

SerenaGoode wrote: »

Yes, at the heart of it, that's my worry. It's so overpriced compared to all sorts of property in many areas of London. Part-owning doesn't solve that problem.

Indeed but then if you can only afford up to say £120-150k to buy a flat what will that get you in London? Either a 1 bedder in a council tower in Tower Hamlets or a studio in New Barnet!

Things have got to (and will) change if someone on a reasonable income (20% above average) with a good deposit can only afford to live in the middle of nowhere or in a violent hell hole!

Even if you're on £60k you can only live in Walthamstow or Stratford. No offence meant but these aren't prime spots. I suppose if you live in Walthamstow you're handy for the dog track at least.

SerenaGoode

Generali wrote: »

Indeed but then if you can only afford up to say £120-150k to buy a flat what will that get you in London? Either a 1 bedder in a council tower in Tower Hamlets or a studio in New Barnet!

Things have got to (and will) change if someone on a reasonable income (20% above average) with a good deposit can only afford to live in the middle of nowhere or in a violent hell hole!

Even if you're on £60k you can only live in Walthamstow or Stratford. No offence meant but these aren't prime spots. I suppose if you live in Walthamstow you're handy for the dog track at least.

All true and possibly a reason for not buying just now - there's no guarantee of price falls, but it could be that the OP's income will improve while prices stagnate at least. I'm not against S/O where the deal sounds reasonable in the first place, but I do worry about this one. I wouldn't suggest living somewhere awful merely to be able to buy either.

SerenaGoode

macaque wrote: »

Bombata

I would prevail on you to think very hard before going ahead with this deal.

For start, it is a 3 way split which seems an odd arangement for a 2 bed flat. If one party gets into financial difficulties, things could go pear shaped for everyone. On the human level, the scope for friction in a 2 bed flat with 3 owners seems limitless to me. Lets face it half the population can't even stay married these days.

Where there are problems in a shared ownership scheme, the easiest solution is to sell up. A forced sale in the current market however could be very painful indeed. Quite apart from anything, the credit crunch is going to have a serious impact on London jobs over the next 18 months.

By all means buy a home for yourself but I would strongly recommend that, in these uncertain times, you have as few co-owners as possible (and ideally none).

I think the co-owner is the HA, not other parties.