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Long time lurker, first real post so here we go.

 

So I myself am probably the person you guys despise but I am self aware and I do try to keep up with the market so I thought I'd share my story and see how people feel about it.

I am a 23 Year old professional working in the london. I currently earn around £70k per annum.

So I was living with parents while saving up for a deposit on a house, personal issues meant I had to move out ASAP (June 2016) I didn't have enough deposit to get anywhere outright so I decided to purchase a property through the shared ownership scheme. I bought a 2 bed flat with parking in London(Zone4) for £400k my share of this property is 55% so I only had to mortgage around 180k and with a £20k deposit that was further lowered to 160k. A lot of apartments in the same building have come up for rent @ roughly 1500pcm which is around what I pay in my Mortgage/rent setup.

So I've been wondering how does this forum view me? Am I part of the problem or not? A lot of my friends keep telling me that I bought at the wrong time which is true but the amount I'm invested is quite low and I'm planning on staying at this place for the next 4 years.

I view it as if I had rented and waited for the inevitable crash I would of been renting and I would of wanted a place of the same quality so around 1,500pcm (£18k) a year anything over 1 year would of been a serious money sink. Where as right now my current rental commitments amount to £6k a year. Barring a massive drop in house prices I can't see how personally I am worse off ( I'm certain you guys will tell me though :) ), but waiting for that indefinitely when I had the means to purchase shared ownership seems like a massive £18k a year gamble.

 

 

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£70K a year.

As I keep telling others on the forum.... market is full of well-paid individuals who have their own minds, and who are happy with their own market choices (to buy).

That people like you don't need to be approved by any superior-knowledge would-be control council.

Enjoy your shared-ownership (lease?) property, and keep comparing your savings vs renting as we go forward. :)

Section 24 is coming.  SDLT surcharge in play.  

We're all market participants.  Owners, BTLers, and renters.

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"A lot ... at 1500 pcm" although that may be the asking price it may not be the price landlords are actually getting. In my years renting in London I never paid the asking price.

If you are living in a development with a lot of absentee landlords it can be very unpleasant. The similar ones I lived in had party flats and anti-social behaviour. My experience was that when rents fell Landlords would stop paying service charges and developments would become depressed very quickly and harder to sell. They would also put in tenants out of desperation that they would not normally rent to. 

2 bedroom flats even with parking at 400k in 2016 were in my experience low quality and often marred by road noise, pollution etc.

When I looked to buy in London I was looking at quality of life and pleasant surroundings. Somewhere I'd be happy to live for 10 years. A 400k flat didn't give me that in 2016.

You run the risk of being trapped there after your 4 years are up or if the flat becomes intolerable or if your circumstances change - if you have to leave and prices have fallen. I posted on another thread about a friend now "stuck" as she cannot get over the fall in price for her 2br London flat.

 We don't know what will happen in the future. It's a huge gamble for all  of us.

 

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3 hours ago, bvrial said:

Long time lurker, first real post so here we go.

 

So I myself am probably the person you guys despise but I am self aware and I do try to keep up with the market so I thought I'd share my story and see how people feel about it.

I am a 23 Year old professional working in the london. I currently earn around £70k per annum.

So I was living with parents while saving up for a deposit on a house, personal issues meant I had to move out ASAP (June 2016) I didn't have enough deposit to get anywhere outright so I decided to purchase a property through the shared ownership scheme. I bought a 2 bed flat with parking in London(Zone4) for £400k my share of this property is 55% so I only had to mortgage around 180k and with a £20k deposit that was further lowered to 160k. A lot of apartments in the same building have come up for rent @ roughly 1500pcm which is around what I pay in my Mortgage/rent setup.

So I've been wondering how does this forum view me? Am I part of the problem or not? A lot of my friends keep telling me that I bought at the wrong time which is true but the amount I'm invested is quite low and I'm planning on staying at this place for the next 4 years.

I view it as if I had rented and waited for the inevitable crash I would of been renting and I would of wanted a place of the same quality so around 1,500pcm (£18k) a year anything over 1 year would of been a serious money sink. Where as right now my current rental commitments amount to £6k a year. Barring a massive drop in house prices I can't see how personally I am worse off ( I'm certain you guys will tell me though :) ), but waiting for that indefinitely when I had the means to purchase shared ownership seems like a massive £18k a year gamble.

 

 

I don't think that you are part of the problem, more indicative of the problem.

Someone earning £70k a year should not need to resort to shared ownership to buy a flat in outer London. I am sure I saw somewhere that it is only a tiny percentage of people in London that earn that amount. I'll see if I can find the source.

It is hardly your fault that the Government have inflated houses prices to beyond the reach of even good earners. You could have waited for them to sort it out, but how long is that going to take - 20 years? More?

Only time will tell if you have made a good decision or not...

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1 hour ago, Flopsy said:

 

2 bedroom flats even with parking at 400k in 2016 were in my experience low quality and often marred by road noise, pollution etc.

 

 

Interesting difference in view between your post and the one above.

My experience agrees more with yours. I am further out than this in zone 6, and even here it is only the poorer 2 bed flats that are dipping below the £400k mark so far. Whether or not this reflects the prices actually being achieved is another matter I suppose.

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In the case of price falls would the person/entity holding the other part of your flat get their portion reduced as well?  Genuine question as I don't know how the shared ownership model works.  So if say you pay £200K and the other party also has a £200K stake (50%/50%) split and the price when you come to sell has fallen by £100K so the flat now sells at £300K do both parties lose £50K?  Or are you the one who suffers the full loss? 

If both parties lose in proportion to their stake then actually they are cushioning you to a certain extent and in that case shared ownership is a good deal.

I agree for a good earner it shouldn't be necessary.

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You're a victim of our feudal system. You rent your flat almost entirely, part from the bank, and partly from some association. You will never own the land underneath you, which is the thing of high and appreciating value, so you have massively overpaid. Many who part rent from a housing association have restrictive covenants on to whom and for how much the property can be sold.

Another way of looking at this is that anyone who overpays becomes part of the problem because he is supporting the ridiculous prices, though what are the realistic alternatives? Live in a van? Camp? Move location? If everyone agreed to go on a buyers strike, or to only offer 2/3 of the asking price, prices would collapse tout de suite.

So in summary, you are a victim who has perpetuated the problem.

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1 hour ago, Millaise said:

You're a victim of our feudal system. You rent your flat almost entirely, part from the bank, and partly from some association. You will never own the land underneath you, which is the thing of high and appreciating value, so you have massively overpaid. Many who part rent from a housing association have restrictive covenants on to whom and for how much the property can be sold.

Another way of looking at this is that anyone who overpays becomes part of the problem because he is supporting the ridiculous prices, though what are the realistic alternatives? Live in a van? Camp? Move location? If everyone agreed to go on a buyers strike, or to only offer 2/3 of the asking price, prices would collapse tout de suite.

So in summary, you are a victim who has perpetuated the problem.

What are the alternatives on £70,000 a year?

Renting.

So a victim you claim.  

Millions of people are not going to go on buyers strike, nor having their buying decisions signed off by Chairman Millaise.  People have their own minds, and are not mindless animals.  Plenty of people believe prices are good value, and no HPC risk, but in fact a big HPI future.  

Earning £70K a year apparently means he/she knows something about being productive.

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22 hours ago, bvrial said:

Long time lurker, first real post so here we go.

 

So I myself am probably the person you guys despise but I am self aware and I do try to keep up with the market so I thought I'd share my story and see how people feel about it.

I am a 23 Year old professional working in the london. I currently earn around £70k per annum.

So I was living with parents while saving up for a deposit on a house, personal issues meant I had to move out ASAP (June 2016) I didn't have enough deposit to get anywhere outright so I decided to purchase a property through the shared ownership scheme. I bought a 2 bed flat with parking in London(Zone4) for £400k my share of this property is 55% so I only had to mortgage around 180k and with a £20k deposit that was further lowered to 160k. A lot of apartments in the same building have come up for rent @ roughly 1500pcm which is around what I pay in my Mortgage/rent setup.

So I've been wondering how does this forum view me? Am I part of the problem or not? A lot of my friends keep telling me that I bought at the wrong time which is true but the amount I'm invested is quite low and I'm planning on staying at this place for the next 4 years.

I view it as if I had rented and waited for the inevitable crash I would of been renting and I would of wanted a place of the same quality so around 1,500pcm (£18k) a year anything over 1 year would of been a serious money sink. Where as right now my current rental commitments amount to £6k a year. Barring a massive drop in house prices I can't see how personally I am worse off ( I'm certain you guys will tell me though :) ), but waiting for that indefinitely when I had the means to purchase shared ownership seems like a massive £18k a year gamble.

 

 

Looking purely at the numbers, you are doing a bit of a HUTH here and ignoring a couple of smallish elephants.

Your exact numbers are unclear, but key is that you intend to stay for 4 years.

I presume you paid £10k stamp duty and maybe £2k buying costs (solicitor / survey etc). Maybe more if you had to pay a mortgage arrangement fee

When you come to sell you will have another 2k legal costs and maybe £4k to Foxtons (other agents are available!)

So that's £18k gone - or £4,500 per annum over the 4 years.

Assuming the flat is in good nick, you won;t have much maintenance - maybe boiler insurance and a bit of a refurb when you come to sell - add another £500 per year.

I would expect you to have to pay a service charge fee - another £1k per annum at a conservative estimate. Much more if you have a lift etc.. So now we are up to £6k per annum over the 4 years.

You say that your rent part of the deal is £6,000 p.a. I will assume you have a 2.5% mortgage deal, so interest on £160k will be £4k p.a.

Adding it all together, you are paying £16k p.a. to 'own' the flat.

Renting would have cost you £18k pa.

So in theory, ignoring the cost of the capital used in the deposit, you are £2k up per annum or £8k over the 4 years by purchasing.

Assuming any possible fall in the value of property is shared equally by you and the funder, a drop in the value of the property of just 1% per annum would wipe out that profit.

So on a purely accounting basis, it comes down to whether you think the price is likely to drop by 4% over 4 years. Many on here think that could happen in the next 4 months.

It then comes down to how important owning is to you / whether security of tenure is important / if you want to have a pet goldfish.

To me it is too high risk. Unless you have the spare cash to bail out of potential negative equity, and also can deal with the additional payments when the help to buy scheme ends, and know you really do want to be there for 4 years, I would have tried to negotiate a better rent on one of the other available flats and a longer lease for security. 

I sense you are hoping for HPI. I think you will be disappointed.

 

 

 

 

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19 hours ago, worried1 said:

I don't think that you are part of the problem, more indicative of the problem.

Someone earning £70k a year should not need to resort to shared ownership to buy a flat in outer London. I am sure I saw somewhere that it is only a tiny percentage of people in London that earn that amount. I'll see if I can find the source.

It is hardly your fault that the Government have inflated houses prices to beyond the reach of even good earners. You could have waited for them to sort it out, but how long is that going to take - 20 years? More?

Only time will tell if you have made a good decision or not...

I agree in 2002 prices were already crazy but someone like the OP (apparently their salary is the same as £47K in 2002) then would have got a very nice house in zone 4.

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19 hours ago, janch said:

In the case of price falls would the person/entity holding the other part of your flat get their portion reduced as well?  Genuine question as I don't know how the shared ownership model works.  So if say you pay £200K and the other party also has a £200K stake (50%/50%) split and the price when you come to sell has fallen by £100K so the flat now sells at £300K do both parties lose £50K?  Or are you the one who suffers the full loss? 

If both parties lose in proportion to their stake then actually they are cushioning you to a certain extent and in that case shared ownership is a good deal.

I agree for a good earner it shouldn't be necessary.

I only ever sell my share if the price were to fall 10% my 50% share would now be worth 180k so I'd be in negative equity of 20k.

 

 

37 minutes ago, Si1 said:

Impressed with you daily commute from rent free parents house in Llandudno.

I did not live rent free with my parents :)

27 minutes ago, CunningPlan said:

Looking purely at the numbers, you are doing a bit of a HUTH here and ignoring a couple of smallish elephants.

Your exact numbers are unclear, but key is that you intend to stay for 4 years.

I presume you paid £10k stamp duty and maybe £2k buying costs (solicitor / survey etc). Maybe more if you had to pay a mortgage arrangement fee

When you come to sell you will have another 2k legal costs and maybe £4k to Foxtons (other agents are available!)

So that's £18k gone - or £4,500 per annum over the 4 years.

Assuming the flat is in good nick, you won;t have much maintenance - maybe boiler insurance and a bit of a refurb when you come to sell - add another £500 per year.

I would expect you to have to pay a service charge fee - another £1k per annum at a conservative estimate. Much more if you have a lift etc.. So now we are up to £6k per annum over the 4 years.

You say that your rent part of the deal is £6,000 p.a. I will assume you have a 2.5% mortgage deal, so interest on £160k will be £4k p.a.

Adding it all together, you are paying £16k p.a. to 'own' the flat.

Renting would have cost you £18k pa.

So in theory, ignoring the cost of the capital used in the deposit, you are £2k up per annum or £8k over the 4 years by purchasing.

Assuming any possible fall in the value of property is shared equally by you and the funder, a drop in the value of the property of just 1% per annum would wipe out that profit.

So on a purely accounting basis, it comes down to whether you think the price is likely to drop by 4% over 4 years. Many on here think that could happen in the next 4 months.

It then comes down to how important owning is to you / whether security of tenure is important / if you want to have a pet goldfish.

To me it is too high risk. Unless you have the spare cash to bail out of potential negative equity, and also can deal with the additional payments when the help to buy scheme ends, and know you really do want to be there for 4 years, I would have tried to negotiate a better rent on one of the other available flats and a longer lease for security. 

I sense you are hoping for HPI. I think you will be disappointed.

 

 

 

 

With shared ownership you only pay stamp duty on your share, my share was 200k so the stamp duty if I rememebr correctly was around £1,500. Solictors fees + Mortgages fees came to around 3-4k and my service charge is 1,800 a year.

 

19 hours ago, GrizzlyDave said:

You are 23 and earn £70k a year.

WTF do you do?

I work in IT but I skipped all that university nonsense so I am 4 years ahead of everyone in my age bracket pretty much

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1 minute ago, bvrial said:

With shared ownership you only pay stamp duty on your share, my share was 200k so the stamp duty if I rememebr correctly was around £1,500. Solictors fees + Mortgages fees came to around 3-4k and my service charge is 1,800 a year

Now that I didn't know. When  / if ever is the balance of the stamp duty due?

 

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1 minute ago, CunningPlan said:

Now that I didn't know. When  / if ever is the balance of the stamp duty due?

 

Quoted from https://www.gov.uk/guidance/sdlt-shared-ownership-property

When you buy a share in a property through an approved shared ownership scheme, you may have to pay SDLT. There are 2 ways to pay:

  • make a one-off payment based on the total market value of the property
  • pay any SDLT due in stages

If you decide to make a one-off payment up front, this is making a ‘market value election’ for SDLT.

If you choose to pay SDLT in stages, you pay anything that’s due on the first sale amount. But then you don’t make any further payments until you own more than an 80% share of the property.

 

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21 minutes ago, bvrial said:

I only ever sell my share if the price were to fall 10% my 50% share would now be worth 180k so I'd be in negative equity of 20k.

 

 

I did not live rent free with my parents :)

With shared ownership you only pay stamp duty on your share, my share was 200k so the stamp duty if I rememebr correctly was around £1,500. Solictors fees + Mortgages fees came to around 3-4k and my service charge is 1,800 a year.

 

I work in IT but I skipped all that university nonsense so I am 4 years ahead of everyone in my age bracket pretty much

Are you a contractor or a permie?

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24 minutes ago, bvrial said:

Quoted from https://www.gov.uk/guidance/sdlt-shared-ownership-property

When you buy a share in a property through an approved shared ownership scheme, you may have to pay SDLT. There are 2 ways to pay:

  • make a one-off payment based on the total market value of the property
  • pay any SDLT due in stages

If you decide to make a one-off payment up front, this is making a ‘market value election’ for SDLT.

If you choose to pay SDLT in stages, you pay anything that’s due on the first sale amount. But then you don’t make any further payments until you own more than an 80% share of the property.

 

That's interesting. So using HTB you get a significant discount against a full buyer. I wonder if that is, as most things, added in to the price?

When you come to sell, I presume that your buyer won't get the same benefit?

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41 minutes ago, CunningPlan said:

That's interesting. So using HTB you get a significant discount against a full buyer. I wonder if that is, as most things, added in to the price?

When you come to sell, I presume that your buyer won't get the same benefit?

When I come to sell I only sell my share, so assuming I dont buy out the other 50% of my property they will get the same benefit.

 

50 minutes ago, Flopsy said:

Are you a contractor or a permie?

Permie! 

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4 hours ago, bvrial said:

I only ever sell my share if the price were to fall 10% my 50% share would I work in IT but I skipped all that university nonsense so I am 4 years ahead of everyone in my age bracket pretty much

Smart move - respect.

Even at 27 that's a tasty wage.

permie! Jeez you must be smoking to be bagging that.

Edited by GrizzlyDave

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Right or wrong you have to own the decision.

Personally I think in your circumstance you would have been better off waiting. You didn't have cash burning a hole in your pocket and nor did you find a rare property that comes on the market once or twice in a year.

I purchased for nearly 2x your purchase price in zone 1 but my piece of mind was worth more to me as my earning capacity is more important.

£70k is good for your age but not uncommon for a junior/mid level software developer - I know many senior people (late 20s/early 30s) in IT making £150-200k in London (permanent) as technology is quite hot now. In finance I know many grad schemes are now starting on £60-70k. It's very strange how big the gap is now between London and other English cities. I truly wonder if this city trend will continue.

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17 hours ago, GrizzlyDave said:

Smart move - respect.

Even at 27 that's a tasty wage.

permie! Jeez you must be smoking to be bagging that.

I'll be soon moving onto 100 (still permie, different sector.) 

 

11 hours ago, longtermbuyer said:

Right or wrong you have to own the decision.

Personally I think in your circumstance you would have been better off waiting. You didn't have cash burning a hole in your pocket and nor did you find a rare property that comes on the market once or twice in a year.

I purchased for nearly 2x your purchase price in zone 1 but my piece of mind was worth more to me as my earning capacity is more important.

£70k is good for your age but not uncommon for a junior/mid level software developer - I know many senior people (late 20s/early 30s) in IT making £150-200k in London (permanent) as technology is quite hot now. In finance I know many grad schemes are now starting on £60-70k. It's very strange how big the gap is now between London and other English cities. I truly wonder if this city trend will continue.

I don't think I've ever seen any permenant non managerial role in IT with £150-£200k advertised anywhere... Do you have any example roles (What field is it?) that are offering this, I will soon be moving onto a new role which is almost at that level but I had to fight to get that. 

Even Data scientist who I believe are on average the highest paid in IT at the moment in this country would struggle to get that wage.

 

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On 06/03/2017 at 4:02 PM, worried1 said:

I don't think that you are part of the problem, more indicative of the problem.

Someone earning £70k a year should not need to resort to shared ownership to buy a flat in outer London. I am sure I saw somewhere that it is only a tiny percentage of people in London that earn that amount. I'll see if I can find the source.

It is hardly your fault that the Government have inflated houses prices to beyond the reach of even good earners. You could have waited for them to sort it out, but how long is that going to take - 20 years? More?

Only time will tell if you have made a good decision or not...

I found this the other day, a bit old (2012 data) but gives a bit of a guide:

https://www.theguardian.com/society/datablog/interactive/2012/jun/22/how-wealthy-you-compared

As for the OP's circumstances, I think they will be ok whatever happens (if they maintain their income). At 23 you can take on a massive mortgage get into huge debt, crash and burn, and still pick up the pieces and start again at 30. Add to that the fact that their monthly outgoings are not much more than if they were renting (disregarding the initial deposit and fees), I can see why they would think this is a good position to take on (lets still note that renting would carry no capital risk).

To me share ownership/HTB just sums up what a ponzi the UK housing market has become. It is the worst of buying, as you have to cover the full maintenance and service costs, even though you only 'own' a % of the flat, and the worst of renting, as you can't just tell the landlord than you aren't going to pay the increased rent and move at short notice (being able to move quickly and no maintenance costs are the upsides to renting). Oh, and I believe that you are not allowed to sub-rent your flat, so yet another restriction! 

I agree with a couple of the other posters that the situation of such a high earner having to use these ridiculous government backed schemes in order to purchase such an overpriced piece of real estate is complete nonsense. An example of the unsustainability of the UK property market.

I will say well done and good luck in your employment endeavours, but I hope this shared ownership agreement is the worst property based decision you ever make! Ha :lol: (Although, as I already stated, I don't think it will affect you too much in the longer term).

Edited by renting til I die
Edit: just to add a bit.

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