Shared Ownership

Getting A Foot On The Property Ladder

Property Ladder

First-time buyers struggling to get on the housing ladder should “move to Germany”, according to Kevin McCloud , the presenter of the TV series Grand Designs. He advised

first time buyers to relocate to a country with a “healthy and resilient” housing market rather than stay in the UK.

On the face of it, things seem more complex than he suggests, even if we ignore the fact that moving to Germany is a bigger decision than a discussion on property prices and since Brexit there is no automatic right of you being accepted by the Germans. Let alone the fact that economically it is now often referred to as 'the sick man of Europe."

According to the Times "The average property price in the UK is £288,430, according to the Halifax, while the average price in Germany is £410,000."

As McCloud says however, many European countries have better protections for tenants, which makes renting a more sustainable long-term option. More than half of the German population rents, compared with only a third in the UK. McCloud, was making the claim that in most of Europe, renting was considered a viable alternative to ownership.

One option to buy in the UK and avoid the huge barriers to entry are Shared Ownership Schemes. On the face to it - there is a huge appeal, but they don't come without warnings. In fact - when I put out a Tweet on @adamshawbiz - I only received dire warnings from people who had bought shared ownership properties - saying that others should NOT follow suit.

Shared Ownership

What Is It?: Shared ownership, is also known as 'part-rent, part buy', and is one way of getting a foot on the property ladder. The scheme allows you to own a share of a property instead of owning 100% of it, while having the option to buy some or all of the rest in the future.

What Do I Pay?:

• That means you need to pay a deposit on the property.

• The monthly mortgage repayments on the share that you own

• The rent on the share you don't own.

• The monthly property service charges, which typically apply to these type of properties.

Who Is Eligible?:

• Eligibility criteria varies by property and area

• Your total individual or combined income needs to be less than £80,000 a year or £90,000 a year if buying in London

• Required to demonstrate that you're unable to afford a property which is suitable to your needs on the open market

• A good credit history

Are There Special Schemes?:

The Older People's Shared Ownership is for those aged 55+. You can buy up to 75% of your home, and once you own 75% of your home, you won't pay any more rent on the share you don't own.

Home Ownership for People with Long-Term Disabilities is aimed at those for whom other shared ownership properties do not meet their needs – for example, requiring special access or a ground-floor property.

How Much Can I Buy?:

• The minimum initial share you can buy is usually 25% – although sometimes this can be as little as 10%. On a resale, the minimum usually has to be greater than 25%

• The maximum initial share you can buy is usually 75%

The Deposit - How Much Is That?:

Usually the deposit is at least 5% or 10% of the share you're buying not the whole value of the property.

How Do I Find a Shared Ownership Scheme?:

In England (outside of London) click here

In England (In London) click here

How Do I Get A Mortgage?:

Shared ownership mortgages are usually more expensive than standard mortgages, ie: they will charge a higher rate of interest. Not all lenders will lend on shared ownership mortgages and therefore your choice of mortgages will be more limited. It might be useful to use a mortgage brokers. Get one, if you can, who doesn't charge you anything but takes their commission from the lender and doesn't load the cost onto your mortgage payments.

How Do I Sell My Shared Ownership Property?:

If you don't own 100% of your property it can be more complex to sell it. First of all, the housing association may insist they try and sell the property, If they can't, you should then be able to put the share of the property you own, onto the open market. But you'll still probably be restricted to selling the property to someone who fits the shared ownership eligibility criteria.

A Little Help Selling:

It can be possible to sell the property as a whole so that it's no longer a shared ownership home by buying the bit you don't own while simultaneously selling it onto someone else. This is known as "back-to-back staircasing". It may not be possible, so it is not something to rely on.

Some Warnings:

But in a report published in March 2024 MPs said the scheme was “drastically failing” to help buyers achieve full home ownership because of rising rents, uncapped service charges and unfair repair costs.

The report published by the Levelling Up, Housing and Communities Committee, said the main issue is service charges. Unlike rent rises, service charges are uncapped. One shared owner told the Committee her service charge had risen by a breathtaking 39% in two years to hit £4,589 a year.

High running costs also come about because the owners are liable for 100% of the repair and maintenance costs even if they only own a small percentage of the property. This has been improved when in 2021 the Government changed the lease terms for shared ownership homes so that new buyers get up to £500 in repair costs covered by their landlord every year for the first decade.

Once the costs become unaffordable, shared owners can then find it impossible to sell up, the MPs said, due to high costs and a lack of support from landlords.

The Department for Levelling Up, Housing and Communities defended the scheme in March 2024 saying: “Shared ownership has a vital role to play in helping people on to the property ladder, and since 2010 we have delivered 156,800 new shared ownership homes."

If you've a question or comment about getting on the housing ladder and want it answered on Times Radio's Money Matters with Adam Shaw - do send it to me here