Shared ownership: help to get on the property ladder

The average deposit required to buy a home in London can be a huge £66,726 - which falls to less than £10,000 when buying a shared-ownership property. Low-cost housing schemes are worth looking into
Chancellor George Osborne has been considering everything from a stamp-duty cut to beefed-up deposit schemes in a bid to boost the sale of first-time buyer new homes. He has also been searching for incentives to encourage the building — and buying — of greener homes.

But the latest research by the National Housing Federation shows why shared ownership is likely to remain the best option for first-time buyers on ordinary salaries struggling to get on the property ladder.

The average price of a home in London is £421,395 and to get an 80 per cent mortgage requires an income of £96,319. Because of the big deposits required, typically £66,726, it is almost impossible for young people to buy without receiving help from parents.

Central Square in Clerkenwell
One of the most top end shared-ownership schemes is at Central Square, in highly prized Clerkenwell, where a 25 per cent share costs £2,322 a month (centralsquarelondon.com)

By contrast, the average price of a shared-ownership home in London is £240,943. Buying the typical 40 per cent share would require a deposit of less than £10,000.

The average combined mortgage and rent for shared ownership is £857 a month, less than half the £1,720 paid by other first-time buyers, and cheaper than the £1,348 it costs to rent privately. Shared-ownership buyers in London have an average income of £33,460.

Previously, shared ownership was restricted to key workers and other needy groups but in recent years the scheme has been rolled out to a much wider audience and the minimum share that can be bought has been reduced to 25 per cent.

First Steps is supported by London’s 40-plus housing associations. It offers a simple registration and search service, allowing buyers and renters to pinpoint all available affordable homes on a borough-by-borough basis. Once registered, you are alerted to developments in your chosen areas.

Housing associations point out that shared-ownership buyers do not have to compromise on location or quality as many of the homes available are at sought-after private developments, and sometimes in posh postcodes. But critics argue that young people are being lured into an untested sector of the market and that there are hidden pitfalls, with owners potentially stuck in flats nobody wants to buy.

PricedOut, an organisation that campaigns for first-time buyers warns that shared ownership can hike the price of housing. “It is insane that some of the highest young earners are having to rely on government intervention to buy 25 per cent of a home.”

PricedOut says there is relatively little trading up and if house prices rise further, the gap to the next stage of staircasing grows larger, trapping people in shared ownership. Service charges are another sore point. These can be up to £2,000 a year at developments that boast so-called “lifestyle extras” such as gym, swimming pool and 24-hour concierge.

Shared-ownership
Sisters Helene and Lizzie Appleby paid £120,000 for a quarter share of a two-bedroom flat at Inspire in Islington
Others point to the cost of some shared-ownership homes. At Central Square, Clerkenwell, some flats cost more than £700,000, and buying the minimum 25 per cent share costs £2,322 a month.

Perhaps the chief benefits of shared ownership are access to good-quality, long-term accommodation, the rental subsidy and the security of tenure.

Pull together your finances
Sisters Helene and Lizzie Appleby paid £120,000 for a 25 per cent share of a brand-new two-bedroom flat at Inspire, Islington, by Origin Housing.

“Obviously the full market price of £480,000 was beyond us but our monthly outgoings now are less than the £1,500 we were paying to rent in the same area,” says Lizzie, 22, a PA at a hedge fund company. Helene, 24, is a student at the College of Law.

“We pay £960 a month in rent and service charge and our mortgage is £370 a month. The good thing is we own a share of the property. It’s a lovely flat and we intend staying for at least five years and hope to buy more shares.”

Follow us on Twitter @HomesProperty and Facebook

Comments