Can Someone Please Remind Me?

[BLOW FLY]

Out for drinks last night with people from the good ladys work, got talking the usual stuff about houses economy etc.

A few of the younger people that work with her have opted for these schemes and were trying to purswade me that it was a good idea....

Anyway, I didn't want to pop their bubbles or upset the gf so I kept quiet, I'd also kind of forgotten the arguments against it

BF

[Our day will come]

Out for drinks last night with people from the good ladys work, got talking the usual stuff about houses economy etc.

A few of the younger people that work with her have opted for these schemes and were trying to purswade me that it was a good idea....

Anyway, I didn't want to pop their bubbles or upset the gf so I kept quiet, I'd also kind of forgotten the arguments against it

BF

I guess it depends what the scheme entails. If you can rent a £200k house for a year at £50/month then buy the house for £100k then it would obviously be a good scheme.

But generally this is not the case!

[Bloo Loo]

one thing is the lack of equity buildup

if house prices rise, you are not getting the full benefit of the equity so it costs you more to change.

and on some schemes, if prices fall, you lose the equity , the builder doesnt.

and on all schemes AFAIK, you pay all the running costs of repairs.

these schemes also appear when prices are at extreme, and are used to maintian the market for a short time. they therefore are a sign of price failure to come.

purchasers therefore are buying at the peak, and are likely to be big big losers.

Edited July 25, 2009 by Bloo Loo

[Bloo Loo]

They could be repairing their credit, want to settle in a house, make some changes to the house, have some certainty, so it can work for a "future owner" in some cases.

these schemes only appear at peak....I wonder why?

Homebuy schemes were effectively, and still are, offering 100% loans.

[Where is my pen?]

Out for drinks last night with people from the good ladys work, got talking the usual stuff about houses economy etc.

A few of the younger people that work with her have opted for these schemes and were trying to purswade me that it was a good idea....

Anyway, I didn't want to pop their bubbles or upset the gf so I kept quiet, I'd also kind of forgotten the arguments against it

BF

it is not that these schemes are bad in and of themselves, but the fact that they are a response to ridiculously over priced housing in the first place. if houses were not so expensive, then these schemes would not be a danger - sharing ownership is nothing unusual, look at stocks for instance.

[Bloo Loo]

Yes they drop after peak but are an all seasons stable in the US and are gaining ground in oz.

didnt know about US.

Oz. now thats a worry. must keep prices up.

[Akrasia]

My objection to these schemes isn't that they're bad for people who buy using them, it's that they're bad for house prices.

The solution to excessive house prices isn't to enable people to pay excessive house prices (e.g. by lending them high income multiples, or by letting them buy half a house if they can't afford a whole one). The solution is to bring down house prices (e.g. by restricting mortgages to sensible income multiples, or by building more homes).

Shared equity schemes just prop up the market. They may mitigate the problem (by preventing some key workers from being driven away from expensive areas), but they also perpetuate it.

I don't want access to a lifetime of crippling debt in order to buy a house, I want to be able to buy a house without needing to access a lifetime of crippling debt.

Edited July 25, 2009 by Akrasia

[Elizabeth]

didnt know about US.

Oz. now thats a worry. must keep prices up.

I've not heard about this one. Must be in some other state - or some other 'top of the market' quagmire dreamed up by a government that is in awe of British social housing!

Edit: The reason I started writing (but was too shocked to remember to say it) was that

a) you have a limited market and you are constricted in who you can sell on to. While I was in Britain the only houses I could even think about affording were share ownership houses. However, I couldn't think about it because I hadn't lived in the authority for 2 years or 3 years or 5 years or whatever, although, it was, comparatively, just next door.

the housing association determines the 'value' using their own valuers, hence if you want to take a knock down price to move on, because you can't get a buyer at the price the housing association have set, you have to reimbuse the housing association to 'market value' (yes, we always thought that was the value set by the market, but no). However they don't need to compensate you for the negative equity that has now befallen your equity.

c) there was a thread on this site about 6 months ago concerning a lady who had paid about 40% and then got in financial trouble and couldn't pay the 'rental element'. The housing association repossessed the house under the rental laws and were found not to be liable for repayment of capital established by the share-owner, which was treated as a windfall to the housing association by a judge who couldn't get his head around shared equity. In other words, unless you pay the rest of what the housing association says is the 'market value', in law these 'shared ownership' houses are just a rental with a bloody great premium which you borrow from the bank at your own expense and at your own risk.

So if you want to get into shared housing, I would say GO FOR IT

Edited July 25, 2009 by Elizabeth

[ccc]

If the prices were reasonable - it would be a great idea. Try before you buy. If you like it take the rent [aid off the price. Great idea. Only one issue. The only reason the builders are doing this is because prices are still ridiculous. As usual the reasoning behind these schemes tells you the real story. Why did they not all do this 5-10 years ago...it would actually of been a good idea then.

[porca misèria]

My blog from the bubble-times:

http://bahumbug.wordpress.com/2007/08/11/h...-housing-again/

This one is a different scheme to last time[1], and the terms are less generous. Specifically, pay 50%, own 50%, rent the other half. It is a good deal, insofar as the rental part is equivalent to a 2.7% interest rate on a mortgage for half the property’s value. That is, if the notional values they’re using are realistic market values: in the open market, one would expect to make an offer well below the asking price.

http://bahumbug.wordpress.com/2007/08/29/s...ership-housing/

The lady in charge confirmed the general terms: no surprises there. What you gain: half the value at 2.7%, and the opportunity to buy out more. What you lose: you accept their valuation (potentially more than once – if you buy out), and you have to ask their permission to make changes (the example I asked about was “if I want to install a solar panelâ€). She also confirmed the taxpayer funding that gets poured into such schemes, driving up the general prices of housing.

Conclusion: as expected, it’s financially somewhat attractive, but the houses are horrible. And the taxpayer money going into this helps inflate the price of anything nice, by lifting the market in general.

[ccc]

Woops. Thought you were talking about another scheme. Part rent/buy shared equity schemes are a joke. Simply designed to keep prices high. Nothing else. For an idea of what the general public think of them - have a link at this football forum that I check on.

'LIFT' Scheme chat

Seems the average Joe thinks these ideas are great. They simply are too ignorant to see the truth. They are being scammed to own 75% of something. 5 years ago there older brother would have bought exactly the same place and owned 100% of it. (Bank ownership/mortage excepted)

Yet they still think it is a great idea. The brainwashing runs so deep in this country. 10 years of it has done it's job for many.

[mbga9pgf]

Woops. Thought you were talking about another scheme. Part rent/buy shared equity schemes are a joke. Simply designed to keep prices high. Nothing else. For an idea of what the general public think of them - have a link at this football forum that I check on.

'LIFT' Scheme chat

Seems the average Joe thinks these ideas are great. They simply are too ignorant to see the truth. They are being scammed to own 75% of something. 5 years ago there older brother would have bought exactly the same place and owned 100% of it. (Bank ownership/mortage excepted)

Yet they still think it is a great idea. The brainwashing runs so deep in this country. 10 years of it has done it's job for many.

Apart from when you have a hidden 100K deposit to use, get a 40% ownhome loan and pay the mortgage off in a year.

I quite fancy a 40% deposit at 0% for 5 years, no mortgage and the remainder to pay off at 1.5% long term.

[Imminent_plunge]

http://property.timesonline.co.uk/tol/life...icle6724467.ece

Anne Ashworth extolling the virtues of shared ownership and using a 40 year old man on a £50k salary as an example.

Earning £50k and can only afford a 35% share of a 2-bed flat in Ealing.

[Elizabeth]

Woops. Thought you were talking about another scheme. Part rent/buy shared equity schemes are a joke. Simply designed to keep prices high. Nothing else.

Yes. Whenever government has to get involved in tricky dicky 'clever schemes' around manipulating the market, you know it is the top of the market. Its a great one to remember for the next boom!

[Imminent_plunge]

Yes. Whenever government has to get involved in tricky dicky 'clever schemes' around manipulating the market, you know it is the top of the market. Its a great one to remember for the next boom!

Along with studio flats being sold as viable, 'luxury lifestyle' spaces rather than glorified bedsits.

[Dorkins]

If the prices were reasonable - it would be a great idea.

Agreed, it's all about the total price you end up paying and what you actually own at the end of it. I think a major attraction of part-buy schemes is psychological pricing. It looks nicer to potential buyers to see a flat with a big red £125k sticker on it than a £250k sticker, and the fact that you are only buying half the flat and paying rent forever on the other half is buried under the emotional decision that has already been made.

[Tonkers]

Also, most of these schemes are for new build developments, what is the depreciation on these? I would worry about shared maintainance costs in blocks.

As the market falls, it may become a nightmare to sell just a share in a dwelling.

[manterik]

My objection to these schemes isn't that they're bad for people who buy using them, it's that they're bad for house prices.

The solution to excessive house prices isn't to enable people to pay excessive house prices (e.g. by lending them high income multiples, or by letting them buy half a house if they can't afford a whole one). The solution is to bring down house prices (e.g. by restricting mortgages to sensible income multiples, or by building more homes).

Shared equity schemes just prop up the market. They may mitigate the problem (by preventing some key workers from being driven away from expensive areas), but they also perpetuate it.

I don't want access to a lifetime of crippling debt in order to buy a house, I want to be able to buy a house without needing to access a lifetime of crippling debt.

That, rather eloquently, sums up my objections to these sort of schemes as well.

Like trying to put a fire out with petrol.

[Bloo Loo]

Apart from when you have a hidden 100K deposit to use, get a 40% ownhome loan and pay the mortgage off in a year.

I quite fancy a 40% deposit at 0% for 5 years, no mortgage and the remainder to pay off at 1.5% long term.

you are a merchant banker and I claim my £5.

[manterik]

http://property.timesonline.co.uk/tol/life...icle6724467.ece

Anne Ashworth extolling the virtues of shared ownership and using a 40 year old man on a £50k salary as an example.

Earning £50k and can only afford a 35% share of a 2-bed flat in Ealing.

More lazy and shite journalism from Ashworth.

It looks like a cut n paste from a PR release. Really these so-called articles are little more than ads.

[Elizabeth]

I was referring to private lease to buy schemes/vendor finance just realised this thread is about shared schemes.

Oh. Woops. Are you from further afield than penzance perchance?

Anyone who has had to witness the british housing market will take it to be the government share buy - and we need to rediscuss it from time to time, just to keep it out there as an objectionable idea, but I am thinking that private lease to buy schemes would probably entail similiar pitfalls - you are buying at the top of the market and entering one of these schemes because you can't afford an ordinary morgage.

Your unit price may tumble (or maybe not in Melbourne - but that is debatable - there is desperate optimisim in the reports and anything born of desperation including optimism always sounds a little bit tinny) and you will be stuck with it until you have the resources to exit without transfering equity from the property you own (since you have none! - just a bloody great debt with no equity to support tranfer of the debt). On the other hand if it is a price you see as a reasonable short-term transfering to long-term valuation then it may be OK. That is the key, private or public. Is the asset going to maintain its monetary value? (and hence your freedom)

[hellsbells]

This is why shared ownership is a very bad idea - see link below.

http://www.housepricecrash.co.uk/forum/ind...amp;pid=1309584

Edited July 25, 2009 by hellsbells

[Elizabeth]

http://property.timesonline.co.uk/tol/life...icle6724467.ece

Anne Ashworth extolling the virtues of shared ownership and using a 40 year old man on a £50k salary as an example.

Earning £50k and can only afford a 35% share of a 2-bed flat in Ealing.

So the government manipulates the market so that a man on almost double the average salary can afford to put a roof over his head? How kind of them. What was Injun saying about benevolence and state control?

The government don't want house prices to drop, but why-oh-why?

Something said to me today. The good thing about the american response to economic collapses in the past is that as a capitalist state it let the companies fall. It walked away. While this was hard and painful it meant the problem was over in a couple of years. This time (and remembering that it was Bush not Obama that gave the money away) they have got themselves in the ring with long term economic pain... all for the sake of desperate politics.

There is only one way that things sort themselves out.

Let the market decide - The market would have decided long ago around house prices if we had not had a major social control tinkering (

• significant housing benefits and low discretionary benefits, so that people could not make cheaper housing options a means of increasing discretionary spending

• share-buys,

• social housing for the most desperate, so that we didn't see homeless people on the streets, but a minute private rental market and minute social housing turnover, so that the manipulated market for the private rental sector involved a squeezed supply side that pushed up demand competition artificially and therefore could support higher morgages

• no tax for the first 6 months on 'empty homes'.

• Local Government tracking down at great expense and then paying exhorbitant headlease agreements to 'empty home' owners (rather than legally repurchasing the abandoned houses, as the law allows)

• Reduced council tax for 2nd home owners.

• Liverpool council leaving entire suburbs vacant in favour of new developments that were sold at a newbuild premium

It would have been short and painful, particularly for people selling deceased estates, and people that had 'forgotten' they owned a property, but it would have brought about new economic conditions.

My take on a mixed economy is -

• Give a safety net to the victims if their life is at risk based on the first 2 layers of the Maslow Heirachy, simply because we are human, but make it a safety net, not an alternative way of life.

[Charterhouse]

Well, hold your horses here.

If house prices rise, you have a cheap option to buy the place at the original price agreed.

If house prices fall you can walk away from the 50% you don't own.

Where's the downside, ASSUMING that you are getting the property for a fair price, which for a new build flat in a new build concentrated area should be down 50% from peak.

[Elizabeth]

Well, hold your horses here.

If house prices rise, you have a cheap option to buy the place at the original price agreed.

If house prices fall you can walk away from the 50% you don't own.

Where's the downside, ASSUMING that you are getting the property for a fair price, which for a new build flat in a new build concentrated area should be down 50% from peak.

Are we talking about private equity deals, in which case you have a loan for the other 50% with the developer rather than a morgage company - no walking away.

If we are talking about share-ownership british public sector style, the Housing Association owns and gets 50% of the sale price - if its over the 'market value' they get their proportion of the equity. If its under their own 'market value' the person coughs up to make up their losses. In the meantime they 'rent' the other half but without the obligation for repairs and maintenance. There is no walking away. You still have to pay the morgage on your share, and if you do walk away they may well get to keep the money you paid to them with that morgage.