One step at a time: How shared ownership schemes work when buying a property in London

Shared ownership is keeping alive the home-buying dreams of young Londoners — and not-so-young Londoners, too, as the average age of the capital’s first-time buyer has risen to 35.

The need to put down a huge deposit to get on the property ladder in the conventional way is often an impossible step, even with input from the Bank of Mum and Dad. So more people are taking advantage of “part-buy, part-rent” deals offered by housing associations.

The maths shows why shared ownership has become such a compelling choice. Whereas the typical deposit required for a one-bedroom “open market” home in the capital is £77,407, the average shared-ownership deposit is £24,358.

Indeed, minimum shared ownership deposits start at just £6,335.97 for one-bedroom flats, and £8,390.60 for a three-bedroom property.

With shared ownership, you buy between 25 per cent and 75 per cent of a property and pay a subsidised rent on the remaining share, owned by the housing association or a charity. Think of it as owning downstairs and renting upstairs.

As time goes on and your financial situation improves, you can “stair-case”, buy a bigger share, until you own the property outright.

Certainly shared ownership gives lower income buyers the chance to find a home at a much more affordable price. And you should be paying less overall in combined mortgage and rent than if you bought outright.

Private renting may be cheaper but shared ownership is a way of getting that vital first step on the ladder.

You need to raise a mortgage only on the percentage chunk you are buying, meaning your salary can be lower than it would otherwise have to be.

One of the rules is that your income needs to be less than £80,000, or £90,000 in London.

Labour is proposing that shared-ownership buyers also enjoy the recent stamp duty exemption for first-time buyers purchasing a home below £300,000.

Currently, stamp duty is charged on the property’s full value, not the share being bought. So if you bought 50 per cent of a £500,000 first home, you would have to pay £10,000 stamp duty.

HOW SHARED OWNERSHIP WORKS

All first-time buyers are eligible to benefit from shared ownership. Sometimes priority goes to people already living or working in the borough where the homes are for sale.

The choice is wide, with thousands of shared-ownership homes available. Visit sharetobuy.com, the leading portal. More than 250,000 Londoners have already signed up.

Simply type in your preferred location and property type, the maximum deposit you have and the most you can afford on a monthly basis. Another website to look at is ownyourhome.gov.uk.

Getting the right home in the right place is just one consideration; you should also think about resale value, ensuring you get a top price when selling, allowing you to move up the ladder.

Arguably, one of the best ways to do this is to buy a shared-ownership flat at a new development where there are sought-after private homes alongside.

WHERE TO FIND SHARED-OWNERSHIP HOMES IN LONDON
Many new apartment schemes, even in Zone 1, include shared-ownership flats built by the same private developer but managed and sold on by a housing association.

Often the homes are identical in design and spec to those for private sale and are equally in demand.

Peabody has 54 snazzy flats at West View Battersea, part of the new Nine Elms district, while 70 flats are available at The City Angel in Islington. From £127,500 for a 30 per cent share. Call 020 7021 4842.

Another 58 shared-ownership flats have been unveiled at two-acre Elephant Park in SE1, where a mix of towers, mid-rise and low-rise blocks will be separated by landscaped courtyards, orchards and woodland plus allotments for residents.

From £156,250 for a 25 per cent share of a home with a full market value of £625,000. Call L&Q (0333 0033 633).

'I NEEDED TO DO SOMETHING SENSIBLE WITH MY MONEY'

Music teacher Jonathan Geoghegan, 29, paid £210,375 for a 45 per cent share of a two-bedroom flat in west London.

“I’d been renting in Hammersmith for six years but I felt I needed to do something more sensible with my money. I knew home ownership was a solid investment but buying on the open market in the area where I had put down roots was impossible with the budget I had.”

A friend tipped him off about shared ownership, so he searched online and singled out Acton Gardens, a new 2,800-home neighbourhood, soon to benefit from nearby crossrail stations.

“I’m close to Chiswick, which is lovely, while Acton has quick links to the West End — important as I spend a lot of time going to the theatre and opera.”

His total monthly repayments are £1,370, roughly evenly split between mortgage and rent.

He put down a deposit of £48,000. There is a yearly service charge of £100 and his household bills are £200 a month.