Part-buy part-rent: the full story for London's first-time buyers

Shared-ownership schemes offer many of London's first-time buyers and key workers the chance to get a stake in their future.
Sobering statistics released this week show why shared ownership has become such a compelling choice for young Londoners.

The average price of a home in the capital is £514,000, and even buyers who have a 20 per cent deposit typically need an income of £108,500, more than three times the London average salary of £33,000, according to the National Housing Federation.

With shared ownership, the entry costs and salary requirements are much lower. The average price of a shared-ownership home in London is under £250,000 — against the £403,000 paid by first-time buyers in the “open” market — and the typical deposit is about £12,000.

Backed by the Government and offered by housing associations, no longer is shared ownership only for key workers and other needy groups. Now it is offered to a wider audience including career professionals such as junior doctors, lawyers and accountants. It is the future for all young Londoners.

Mayor Boris Johnson has launched a First Steps initiative offering a simple registration service allowing buyers to pinpoint all available affordable homes on a borough-by-borough basis. Thousands of homes are listed on the website and new developments are added regularly, including riverbank and canalside schemes in central London. Some are available off-plan, usually several months before they are complete, allowing buyers to organise their move. See www.sharetobuy.com/firststeps.

Many people find shared ownership confusing. Often buyers ask if it means living with someone they don’t know, which is definitely not the case. Anyone earning less than £66,000 a year, or £80,000 for families, qualifies. Typically, applicants must have at least £4,000 in savings to cover buying costs, in addition to the minimum five to 10 per cent required by a mortgage lender. Stamp duty is not payable if the share is less than £125,000.

Housing associations say shared-ownership buyers need not compromise on location or quality as many of the homes available are at sought-after private developments, occasionally in posh postcodes.

A big decision is how much equity to acquire. A decade ago, when shared ownership was in its infancy and house prices were lower, the typical first share bought was 50 per cent. Today it is 35 per cent, or £82,250, and the ability to “staircase” to outright ownership is more financially challenging.

Perhaps the chief benefit for buyers today is not the chance to own 100 per cent of the property, but to have a good-quality, new-build home at a reduced cost, with an equity stake and security of tenure.
 
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Adam Reynolds: "Buying a share was a life line. I’m in my own place, paying the same as I did to rent."

Adam Reynolds, 29, manager of a digital media company in Regent’s Park, viewed 30 properties on the open market before buying a two-bedroom shared-ownership flat at Factory Quarter in up-and-coming Acton.

He paid £247,000 for a 65 per cent share of the £380,000 flat and says the monthly payments are about the same as the cost of renting his former small mansion flat in Hammersmith. “I’d been trying to save a deposit for eight years and wanted to stay near Hammersmith, but getting on the property ladder there proved impossible because prices were beyond my reach,” says Adam. “Shared ownership was a lifeline. I wanted two bedrooms because my parents live abroad and I need to host them when they visit. And where I live now is only a 15-minute walk from Hammersmith.”

Factory Quarter, a former industrial site where parts for Spitfire planes were manufactured, has more than 400 homes, including loft-style apartments with high ceilings and big windows. Prices start at £72,500 for a 25 per cent share of a home with a full market value of £290,000. Call Genesis Housing Association on 0800 954 2343.
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