The Advantages of Shared Ownership

In a market of rapidly rising property prices, a Shared Ownership property may be the only chance for buyers on low to middle incomes may have to get on the property ladder. Originally aimed at those people who worked in key public sector roles such as nurses, teachers, police officers and other public workers (who were unlikely to achieve as high a salary as those working in the private sector) and people who are just starting out in life, Shared Ownership is now often the only choice for those who have incomes which, only 10 years ago would have been considered as being relatively high. The fact that Shared Ownership Schemes are now offered to those with incomes of £60,000 per annum is indicative of just how much house prices are rising and how hard it is for the average person or family to get a foot on the housing ladder.

In areas such as London, where the property prices are high, families struggle to able to raise significant sums to put towards deposit whilst at the same time paying high rents.  With rents in excess of £2000 per month, it is difficult for a family to be able to save any money at all towards a deposit on a house, especially when the average deposit required is in excess of £30,000, so it is easy to see why families are increasingly having to turn to affordable housing schemes such as Shared Ownership.

Smaller deposit required

A Shared Ownership Scheme will allow the buyer to put down a much smaller deposit and purchase a much larger property than they would otherwise be able to purchase on the open market.

Smaller mortgage required

The ability to purchase as little as a 25% share in a property requires a smaller mortgage than would otherwise be the case. Although the buyer will have to pay rent on the remainder of the property, the total of mortgage and rent is usually the same as if not less than renting a property as a tenant.

Easier to obtain a mortgage

The fact that the buyer will require a much smaller mortgage for a Shared Ownership Property makes the mortgage more easier to afford (especially in light of the tighter affordability tests involved in obtaining a mortgage) meaning that those that previously had no hope of getting a mortgage are now able not only to get a mortgage but also to get their foot onto the housing ladder.

An appreciating asset

When renting a property, the only benefit gained by the tenant is the use and right to occupy the property for a given term as defined and controlled by the landlord. The money being expended in rent is simply lost to the tenant. With a Shared Ownership property, the share of the property that has been purchased will increase in value as the prices of property continue to rise.

Security

A Shared Ownership property also offers security and certainty to families who may otherwise not be able to afford to escape the uncertainty of private rental properties.  When renting a property in the private sector the tenant can be asked to leave at any time (subject to the statutory notice periods under the Housing Acts) which can cause disruption (for example in the lives of young children who are continually having to change schools) and this makes it impossible for the family to make any long-term plans. With a Shared Ownership property, the family will own the lease to the  property and so long as they are able to continue to pay their mortgage and rent they will  able to live in the property for the term of the Shared Ownership lease, giving them the opportunity to lay down firm roots.

Higher standard of accommodation

With property prices being so expensive and continuing to rise, the choice of properties available to those on low to middle income is limited and generally of poorer quality. The majority of Shared Ownership properties are newly built and are therefore of a standard which is much higher than the buyer would be able to afford on the open market. There is the added bonus that as they are newly built, there is very little maintenance to be carried out and they are newly decorated. For the first 10 years, they are also usually covered by a warranty against any defects.

Those Shared Ownership properties that are not newly built but are properties which have been refurbished by Housing Association are also refurbished to a high standard. By the very fact that Shared Ownership properties are in the main provided by Housing Associations means that they are subject to strict regulations as to the maintenance.

Stamp Duty

Another advantage of purchasing a Shared Ownership property is that in the majority of cases the buyer is able to avoid having to pay stamp duty land tax on their purchase as the value of the share is usually below the threshold at which stamp duty land tax becomes payable. This may save the buyer a substantial sum of money often in the region of £2000-£5000.

For many people and families on a low to middle income Shared Ownership provides a chance to get on the housing ladder and to escape a life of endless rental in poor quality accommodation and the opportunity to “put down roots” and make long-term plans in an area of their choice.