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lewissheridan

Shared Ownership Is The Only Way Forward

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Having been informed just recently my Landlord is selling our rented one-bedroom flat - it's forced an issue whereby I need to find an alternative place to live. This is hugely inconvenient for me, since my wife is expecting a baby in less than two weeks, but looking on the positive side, it forces the issue of whether I buy or continue to rent. Now i don't want to rent, but i feel trapped to rent, and given the high cost of renting, it would make sense to probably just as well go and buy.

Renting is going to cost me £600 pcm for a property i don't want, i.e. a 1-bed flat, or £750+ pcm for a property that meets my requirements, i.e. a 2-bed flat/house.

Contrast that against a mortgage -

My colleague has a shared-ownership mortgage on a 200k property. He has 50% stake, so a mortgage on £100k, which is about £660pcm, then he pays rent on the remaining 100k @ £100 pcm. So in total his repayments per month don't exceed £760. Which is a figure i'm comfortable with paying.

I am prepared to borrow £120k, and a further £60k from a HA for the shared-ownership so that i own, or borrow a mortgage on 2/3rds of the house value. So my budget is £180k, and with that i can afford to buy a 2-bed terraced with a bit of garden. So the shared ownership scheme seems to be making sense to me. I have rejected it for so long now - but now i'm in a situation to appraise those options available to me which are:

1. Rent indefinately in hope of a significant correction in the affordability of houses

2. Stretch myself and buy a 2-bed flat and live in effective poverty whilst owning and being really sensitive to interest rates.

3. The former with a shared equity stake to bring back the balance of affordability and home ownership.

Out of those 3 options, option 3 makes most sense to me. I know it can be argued it's this which is propping up the house prices... but option 1 is living in hope - with a family to support, we need a home... not some rented accommodation where the money just goes to some greedy btl, further buying one of their houses and meeting the same ends of high house prices presented in option 3.

i don't usually suffer from head-aches or migranes, but recently i have. There's too many injustices in this countr with the benefit system etc, and who deserves what, and people moaning and wingeing, and i hold my hand up because i've done most of it. But irrespective the focus on here for me, is how can us first time buyers move forward in this far from ideal situation. I would appreciate any thoughts, constructive thoughts that is, rather than the barrage of renting is wasting money, shared ownership is proping up the economy. And i would also enjoy hearing how other people are coping since i'm sure i'm not the only one in this sort of scenario.

BR Lewis

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I think option 1 is out. Maybe from a financial point of view it makes sense, but I suspect your wife will have things to say about that! Your own home gives a sense of security even if it is a false sense. Option 2 is dangerous, especially with a kid on the way. I wouldn't stretch myself in normal circumstances, certainly not with a new family. Option 3 might be a sensible half way house. Start to get some equity without the stretch. Also if HP fall, you might be able to buy the rest cheaply.

Edited by Charles_Darke

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Shared ownership properties are way overpriced. Have some in my area for 110K for half share, when a similiar house would sell for <170K for 100% ownership!

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Shared ownership properties are way overpriced. Have some in my area for 110K for half share, when a similiar house would sell for <170K for 100% ownership!

i done a bit of research and apparently if you want to buy shared ownership on the open market, people with council houses have priority over people like me!!!!!!! in addition, shared ownership properties have to be marketed as such to get that 'deal' as it were. Again so unfair, so basically my shared-ownership dream is down the pan already at hurdle one! i don't qualify, OR i can buy a marketed shared-ownership property which as pointed out by OzzMosiz is up to 20% already overpriced. So you're paying a premium for not being able to afford it - doesn't that sound familiar!!!

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he pays rent on the remaining 100k @ £100 pcm

[cynical mode]

Is that really true? It sounds awfully low... how do these schemes work on the rental half?

Perhaps it is an introductory rate that jumps to £300 after a year?

I can't see how £100 is sustainable.

[/cynical mode]

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[cynical mode]

Is that really true? It sounds awfully low... how do these schemes work on the rental half?

Perhaps it is an introductory rate that jumps to £300 after a year?

I can't see how £100 is sustainable.

[/cynical mode]

It was based on that I put some time to shared ownership, i assumed the shared half would be equivalent to an interest only mortgage so that it would be some hybrid repayment on the first half and interest only on the second half. I didn't delve deeper, but yes it seems far to low and affordable, that it might be over a 60 year period or some introductory offer like you say.

Is there anyone on here currently doing shared-ownership that can elaborate on how it works ?

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i done a bit of research and apparently if you want to buy shared ownership on the open market, people with council houses have priority over people like me!!!!!!! in addition, shared ownership properties have to be marketed as such to get that 'deal' as it were. Again so unfair, so basically my shared-ownership dream is down the pan already at hurdle one! i don't qualify, OR i can buy a marketed shared-ownership property which as pointed out by OzzMosiz is up to 20% already overpriced. So you're paying a premium for not being able to afford it - doesn't that sound familiar!!!

I was under the impression that you had to be on the council list, not in a council home. Had a couple of friends who said that the mrs was pregnant to get up the list to buy a shared ownership. They of course were lying - you are not.

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I was under the impression that you had to be on the council list, not in a council home. Had a couple of friends who said that the mrs was pregnant to get up the list to buy a shared ownership. They of course were lying - you are not.

I wonder whether it's the state of the government that encourages that sort of lying or playing of the system, or whether it's human nature, or indeed both. Either way, it does reduce my faith in humanity... it reminds me of when i parked in a child parking bay so that my 8 month pregnant wife could get out of the car, to be told off by someone that it's exclusively for people with children and not 'parents to be'. I can understand his point and frustration, but come on, i look down on people myself that do it without children, and they do it all the time, the first time i pull up with my pregnant wife i'm condemned. I think a lot of people miss the point - and sometimes don't understand their misplaced anger.

Anyway sorry for deviating - point is shared-ownership isn't much of the saving grace option i thought it was, it's another system, another construct, ready to be exploited and abused. Only takes a few to ruin it for everyone as they say...

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Hi Lewis

I recall from previous posts of yours that you earn around £35k and want to live in SE London?

I think you have a lot of great options for buying. Given your family circumstances and the fact that you are clearly craving a home of your own to give your family a happy existence, I advise the following:

There are plenty of properties in SE London (3 bedroom freehold houses) for less than £200k. Get yourself a mortgage interest only (say £170k, assuming you have a bit for a deposit?). This will cost you £715 per month fixed at 4.99% for 5 years (so no IR worries for a good while) - within your budget.

You can then also try to save and make lump sum repayments on the mortgage. I assume you are in a job where you will see some salary progression over the next 5 years. This will make it easier for you to save, and when your little nipper goes to school your wife can also work and ease the burden.

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Hi Lewis

I recall from previous posts of yours that you earn around £35k and want to live in SE London?

I think you have a lot of great options for buying. Given your family circumstances and the fact that you are clearly craving a home of your own to give your family a happy existence, I advise the following:

There are plenty of properties in SE London (3 bedroom freehold houses) for less than £200k. Get yourself a mortgage interest only (say £170k, assuming you have a bit for a deposit?). This will cost you £715 per month fixed at 4.99% for 5 years (so no IR worries for a good while) - within your budget.

You can then also try to save and make lump sum repayments on the mortgage. I assume you are in a job where you will see some salary progression over the next 5 years. This will make it easier for you to save, and when your little nipper goes to school your wife can also work and ease the burden.

Thanks for that advice, I'll have a look into that. I'm finding myself addressing options that have been available to me, but i've either been blind to consider, or just had a fixed notion in my mind i want a repayment mortgage over 25 years and in turn dismissed them out-of-hand. I guess it's time to start getting creative, and saving and investing as part of a strategy to home ownership. I have £5k for deposit, which i find increasingly hard to grow. IO might be the short-medium term solution until this house-price bubble / affordability issue sorts itself. Having worked in IT and been made redundant twice, i'm not overly optimistic about employment in general, but the company i work with now i have a feeling i will progress well.

Thanks again for the advice, probably what i've been waiting to hear. Some sensible suggestion with the clarity of seeing the scenario objectively.

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It was based on that I put some time to shared ownership, i assumed the shared half would be equivalent to an interest only mortgage so that it would be some hybrid repayment on the first half and interest only on the second half. I didn't delve deeper, but yes it seems far to low and affordable, that it might be over a 60 year period or some introductory offer like you say.

Is there anyone on here currently doing shared-ownership that can elaborate on how it works ?

I actually thought that the rent is not that much different to IO mortgage, I think your £100 figure is much too low.

The benefit of shared ownership is that you can get the mortgage for 50% but the costs are not that different to paying IO mortgage on the whole lot.

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Hello Peeps,

New here, but have been reading with interest for some time now.

Consider me your ‘man on the inside’; I’m a development consultant who primarily works with registered social landlords (RSL’s) who operate low cost home ownership (LCHO) properties. This is how it works:

LCHO property is sold bit by bit – traunches – and these traunch values are decided by an ‘affordability’ calculation (this tends to be dictated by a survey of incomes of the people who are on the Housing Association or local authority list).

A typical example would be this = 2 incomes of £10k net with a x3 multiple gives you a £60k mortgage, which buys you say, 50% of the LCHO property. You now pay rent on the remaining 50%.

Now here is the trick: the rent (capped at 2.75% of the outstanding balance per annum) plus the mortgage can be no more than 30% of the income, other wise it is deemed ‘unaffordable’.

I hope this helps, it goes some way to show how the residual rent on an LCHO property can be £100.

Nice to meet you all.

G

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What do I think of shared ownership? It's the most stupid idea since Olaf the Hairy, Chief of all the Vikings, accidently ordered 80,000 battle helmets with the horns on the *inside*.

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Hello Peeps,

New here, but have been reading with interest for some time now.

....

Nice to meet you all.

G

Hi OD, thanks for your insightful post, and welcome to the forum.

Given your position in the industry, what do you think would be the best strategy for first-time buyers like myself in making an entry to the property market.

Also, what are your thoughts given current pricing levels, do you think they're sustainable, and has this reflected in the demand in your sector for LCHO properties.

What do I think of shared ownership? It's the most stupid idea since Olaf the Hairy, Chief of all the Vikings, accidently ordered 80,000 battle helmets with the horns on the *inside*.

Care to elaborate further on your reasoning ?

Personally i think SO is a last ditch attempt to keep house prices artificially high, but at the same token, if is a viable way for me to afford a home whether i like it or not.

Edited by lewissheridan

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Hi OD, thanks for your insightful post, and welcome to the forum.

Given your position in the industry, what do you think would be the best strategy for first-time buyers like myself in making an entry to the property market.

Also, what are your thoughts given current pricing levels, do you think they're sustainable, and has this reflected in the demand in your sector for LCHO properties.

Care to elaborate further on your reasoning ?

Personally i think SO is a last ditch attempt to keep house prices artificially high, but at the same token, if is a viable way for me to afford a home whether i like it or not.

Hello there, and thanks for the welcome!

Personally, I think we are near the very end of sustained growth - land is now so overpriced that developers are having to accept very low profit margins (5% is not uncommon). Land owners are now surrounded by savvy agents who know the very maximum the land will yeild and so the question becomes 'who will take the lowest margin?'

The answer to that in certainly not RSL or other 'affordable' developers, highrise seems to be the only thing keeping london development going at the mo (the densities being proposed are in some cases quite difficult to justify on a planning policy basis, maybe some brown envelopes are changing hands...).

Sorry to ramble. the short answer here is not to buy - give it a few months at least to see what interest rates do (and keep an eye on things over the pond - they seem a little ahead of us but in the same cycle(ish)) - if there is a drop in asset value then even with LCHO you will be in neg equity.

I hope this helps!

OD

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Objective - good to have you on the team.

What about the quality of these places - any good?

That development in New Cross looks ncie but is all wood frame construction. Seems a bit dodge to me.

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Another point (while I remember!).

Most people are not eligable for LCHO schemes anyway - you need to be on a list with the Local Authority, have little or no personal dept, be willing to be quite flexible as to where you live, and be ready to give up 29% household income for half an asset.

In answer to a previous point, LCHO seems to make up about half of the affordable properties that we are developing (although this changes from LA to LA) - and most of the LCHO stuff hangs around a while before being moved (there is a limited number of LCHO units on any scheme, but still people are not always that keen on what they are being offered!).

Cheers,

OD

Objective - good to have you on the team.

What about the quality of these places - any good?

That development in New Cross looks ncie but is all wood frame construction. Seems a bit dodge to me.

Actually, the units offered tend to be a good size with basic but solid fit and finishes.

Timber frames are used to meet the insulation requirements of the building regs - you can go to 5 stories with timber and get very good heat insulation (and its cheap, can be part built off site, its strong, it can be stuffed with fire proof foam etc). It is a good point though, people like to be able to hang a picture!

Cheers, and good to be chatting with you all (off home now, but back at the crack of dawn!)

OD

Edited by Objective Developer

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Another point (while I remember!).

Most people are not eligable for LCHO schemes anyway - you need to be on a list with the Local Authority, have little or no personal dept, be willing to be quite flexible as to where you live, and be ready to give up 29% household income for half an asset.

In answer to a previous point, LCHO seems to make up about half of the affordable properties that we are developing (although this changes from LA to LA) - and most of the LCHO stuff hangs around a while before being moved (there is a limited number of LCHO units on any scheme, but still people are not always that keen on what they are being offered!).

Cheers,

OD

I think for many of us on this forum, particularly first-time-buyers, it has been a long waiting game... and i've said it before and will say it again, it will be a long drawn out affair before there is any readjustment or correction in house values. A saying that has always resounded in my mind when thinking about house prices is they'll get worst before they'll get better. At the moment they feel like they can't get much worst. I've actually been given my marching orders as it were in the flat i rent - the landlord is selling up... being trapped into renting, with a little boy expected in two weeks, vs the prospect of buying is putting pressure on how long i can really wait. As the waiting game is indefinate at the moment with what would seem the government and vested interests pulling out all the stops to keep this bubble growing.

I don't know what will occur first, breaking point in house prices, or breaking point in my sanity. I shall have a look at the US economy in respects to house prices to gleam any insight into what's may play out here.

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Personally, I'd rather get my tongue beaten wafer-thin by a steak tenderiser and then stapled to the floor with a croquet hoop, than enter into shared ownership. But that's just me :unsure:

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In your situation, personally I would continue to rent (and do rent, with a family) and I am eligible for Shared Ownership and a whole host of other 'initiatives' such as HomeBuy, Keyworker Living etc. I am confident the housing market is going to collapse and I am damned sure it won't be taking our money and future with it.

Have a look at this previous thread on SO for other viewpoints.

http://www.housepricecrash.co.uk/forum/ind...topic=22681&hl=

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This could be a long post - or two.

Please get out your excel spreadsheet and do the maths. As tempting as the offer may be - if you do the maths you might wonder why it's such a good deal.

Firstly, I nearly bought into Shared Ownership - was being pressured by family to do so - but did the maths. Also have an EA brother who specialises in selling SO, and when I presented him with all the facts and quizzed him on the finances - he agreed don't go there (although initially had his sales hat on!).

I do know of schemes where they were initially key-workers - low take-up. Went to local govt workers (not on housing lists) - still low up-take. Expanded list including Post Office workers. Still low. Then to anyone earning over 17K living in the area (no matter how long) advertised through local press. If you joined the scheme you were encouraged retrospectively to join the local housing list - but on a special SO list as anyone not in dire need with a low salary won't make it on the normal housing list.

Seems to me whether SO is available depends on where you are and how the SO's are selling. Doesn't seem to be dependent on lists - but all local govt have SO lists to join and then they send you leads - you then contact the SO Association.

There are loads of things not good about SO. For example, you can only sell back to them in most cases. Although it seems to imply that you can buy out your share to 100%, then sell on the open market - not until I was close to buying did I read the small print and discovered could only ever own 95% (apparently govt driven figure), so that the SO Association always retains the property. What you then sell at may not be market rate - as its' their valuers who value the property.

Value of the property initially - in most cases I've studied - always over-priced to start with. That was another thing I worried about. Sometimes not easy to judge as they are often new builds in new build areas - and so no precedence for history.

When asking about rental increases - discovered they would be going up by 10% each year - at least for the first 5 years - something to do with the way the insurance for them works and the expected costs to be covered for new build snags etc.

Sold as "seen" - as a new build - did not encourage you to get a separate valuation.

Despite new build - various things not quite right - when asked about sorting out snagging - again not us, you deal with.

Building insurance is paid by you - but you have to pay as they advise - you may be unable to benefit from market-prices.

Any service charges - also increase - at more than average.

Posting this now and continuing thread ...

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In your situation, personally I would continue to rent (and do rent, with a family) and I am eligible for Shared ....

http://www.housepricecrash.co.uk/forum/ind...topic=22681&hl=

Shared ownership poses too many potential risks for me now. I'm quite a prudent person, and prefer a simple life, work hard, own a house. But I wonder whether that's an illusion afforded to me by the capitalist society/economy/political country we live in. Maybe I need to readjust my expectations, maybe I think i deserve too much ?

Whatever the moral and ethical rights and wrongs are of capitalism and where it has taken our economy and house prices - there exists now a social underclass of people that cannot hope to own property in their lifetime, and a superior class of landlords that have leverage their speculative borrowing capability to such ends to further fuel the inflation, and then bask in this state at the misery of others (non-home-owners). What's more disconcerting is that they are genuinely blind to what they are doing - or pleading ignorance - but isn't it the capitalist way to accrue more and more...

I really will wonder how this all pans out, Thatcher selling social houses was a big mistake, people feel richer under the illusion of HPI, but in real terms i don't see anyone better off than landlords. Also i wonder whether my thoughts on fairness would be the same had i been born 5 years prior, have massive equity... maybe i would think nothing of it. I can't do shared ownership, doesn't make sense to me... emmigration is something that plays in the back of my mind...

is there a solution, mr. crash please come along quickly and swiftly... let's get a decent government in that can spend responsably to meet the needs of the country and not encourage free-loaders... put in market controls to control the sanctity of our own homes that we spend a lifetime working for...

personally there's no reward for me to work 40 plus hours a week, it afford me ****** all, a poxy 1-bed rented flat, 1/3rd of income going to landlord that lives in a different country.. subsistent living on disaposable income due to general high-cost of living and stealth taxation... i can jack my job in, be put on priority council housing, get a house that way, oh and whilst i'm at it get paid for not working!!! and maybe claim depression to have a nice little scam on the system if what i was doing wasn't abuse enough. Let the government pay my stupid student loans that i had to take to subsidise my 'free' education, to the betterment of myself, the country and the economy. NOT

:angry: btw i don't think shared-ownership is a great idea afterall, read above thread

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shared-ownership = a way to flog half the overpriced *hole you buing to some other shmuk

Edited by jonpo

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This could be a long post - or two.

...

Posting this now and continuing thread ...

If the previous post didn't put me off SO, your one certaintly did. :rolleyes:

Appreciate you adding it to the thread. There's the feeling of a 'con' in there with the stipulations, fine print, and again it not being tried and tested. As i've learned with renting, all clauses will someway directly or indirectly disadvantage you at some point - and favour the LA, EA or HA. I get the same feeling with SO and will steer well clear.

I haven't seen many anecdotal posts about SO so it's hard to guage a realistic evaluation of whether it's a good thing or not. I think the scepticism it receives is well founded.

Where do you stand now in respects to home ownership if you don't mind me asking ?

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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