The myth that first time buyers have to be key workers, and that key workers only get second-rate property is now firmly put to rest.
A £480 million shared-equity scheme — HomeBuy Direct — bankrolled by the Government plus the return of 90 per cent mortgages is the good news for young Londoners.
Other low-cost ownership initiatives offered by housing associations are putting smart, central London venues within the reach of first-time buyers. Thus making it easier for twentysomethings longing to leave home to gain their independence without the penalties of being forced to live in unsatisfactory rented accommodation in tough areas.
Over the coming weeks, Homes & Property will bring you details of these home-buying opportunities
as part of a special series about housing young London.
The recent Budget boosted by £80 million the funds available under the HomeBuy Direct scheme following a tidal wave of interest (32,000 applications) since the initiative was announced last September.
More than 100 developers are taking part, which allows buyers earning less than £60,000 to take out a mortgage for 70 per cent of the cost of a new property, with the Government and the developer jointly lending the remaining 30 per cent on an interest-free basis for five years. This overcomes the biggest obstacle faced by buyers of raising a sizeable deposit. Buyers can still negotiate with a developer on price and any package of extras.
‘Twentysomethings longing to leave home can gain independence without having to live in tough areas’
Each developer has an allocation of money, linked to specific properties and building plots. Deals are offered on a first-come, first-served basis, so if you are interested do not delay. There are 23 agencies that each cover specific counties. For information and to apply, contact the HomeBuy “agent” for your area by visiting either www.housingoptions.co.uk or www.homesandcommunities.co.uk.
Applications for HomeBuy Direct prove there is enormous pent-up demand for affordable homes. Some developers believe they may run out of stock by summer. Most participating developments were under way before the credit crunch but relatively few new projects have started over the past year.
At Barratt’s Kennington Park Square development, 26 flats were allocated to the scheme when launched in March. All were sold within a month.
Mortgages for 90 per cent of property values had all but disappeared over the past 18 months. However, banking giant HSBC has introduced a range of reasonably priced deals for buyers with as little as 10 per cent deposit. This is expected to spark fresh competition among lenders, say brokers.
There can be dangers with shared-ownership schemes. Ipswich Building Society found half the properties it repossessed last year were shared-ownership homes, suggesting that schemes can encourage buyers to overstretch themselves.
Step on for £40,000
Buyers can get on the property ladder for less than £40,000 via one of the schemes available. Properties range from riverside apartments to homes in leafy parkland settings and can be found in sought-after locations across London and the Home Counties.
Often, developments come with lifestyle extras such as a spa or concierge services, and have eye-catching new “green” architecture and designer interiors.
At Vantage Square, close to Victoria Park in Hackney, a 25 per cent share of a one-bedroom flat costs £36,250. developer Family Mosaic offers a furniture-pack worth £4,000 plus free legal fees and a guaranteed price on resale. Call 020 7089 1315.
At The Edge, in Bow, next to the 2012 Olympics site, One Housing Group is selling 35 per cent shares in one-bedroom flats for £66,500. Call 0800 234 6242.
Housing group Genesis, which is bringing forward 1,000 homes this year, has released flats within the grounds of a listed mansion at Queen Mary’s Place, Roehampton. Prices start from £56,375 for a 25 per cent share. Call 0800 883 0531.
Other developments include Vada, in Hoxton; Kingsway Square, a listed college conversion in Battersea; Wharfside Point North, Docklands, and Horizon, Brixton.
At Factory Quarter, Acton, the cost of part-buying, part-renting a one-bedroom flat worth £222,500 would be £820.04 a month, against £1,389 if it were bought outright, according to Genesis. Call 020 7173 4999. Indigo is a canalside development in Shoreditch close to the new Haggerston East London line station due to open in autumn 2010. A2 Dominion is selling 25 per cent shares from £61,250. Call 0800 783 2159.
Developer Fairview says it is much cheaper to buy than rent. Its Flying Start scheme provides a 25 per cent deposit that is interest-free for up to 10 years. Buying a one-bedroom flat at its Fusion development in Croydon would cost £422 a month compared with £727 in rent. Call 0800 883 8143.
What you need to know, by Jane Barry
It’s not for people like me: Affordable housing isn’t only for people on low incomes and key workers. If you are a first-time buyer earning up to £60,000 you are eligible. Middle-class professionals — doctors, IT consultants, TV producers — are choosing it as a solution to buying their first home.
I can’t buy a property outright: Buying a share in a property is a good way to full homeownership if you are on a relatively low income. But there are also three equity loan schemes that allow you to buy outright. With HomeBuy Direct, for instance, you can buy a new-build home directly from a developer.
I have to buy a new-build property: There are two equity loan schemes that help you buy a property on the open market. With MyChoice HomeBuy and OwnHome, you can choose any property you want — Victorian, Thirties, modern — as long as it fits the schemes’ criteria.
It’s in rough areas: There are affordable housing schemes all over London, from Kensington & Chelsea and Westminster to the exciting regeneration areas in East London, close to the Olympic site.
If I buy only a share, I’m not a proper homeowner: As a shared-owner you own the equity jointly with a housing association and pay rent on the part you don’t own but you still have all the rights and obligations of a full homeowner, even if you start with a 25 per cent share. And, as your finances improve, you can buy further shares (called staircasing) until you own your home outright.
It’s substandard housing: Nowadays, the interior specifications for affordable homes match those you will find in the private market. And affordable housing is built to exacting space and environmental standards — last year, when the Government tried to persuade housing associations to take over developers’ unsold homes, the plan faltered because many of the properties did not meet these standards.
I have to commit myself to buying straightaway: Not if you choose a rent-to-buy flat. There are now a number of schemes that allow you to rent at below market rates, with the option to buy a share later if you like the flat.
I don’t qualify if I’ve owned a home before: Although affordable schemes are for first-buyers, if you are divorced or have suffered a change of circumstances, you may, in some cases, be eligible.