|10 minute read
Shared ownership is now attracting first-time buyers from across the UK’s towns and cities
Written by Matt Roberts, PR and media advisor
With mortgage rates on the rise, the dream of home ownership seems to be slipping ever further away for many people. Yet, as one door closes another seems to be opening, with the shared ownership model offering an alternative cost-effective route to get on to the property ladder.
In London, shared ownership has been an established route to owning a home for some time as it can offer a cheaper and more permanent option to rental properties. In Wembley, a two-bedroom shared ownership property comes to around £1,800pcm including rent, mortgage, and service charges – compared to rental properties in a new build site at around £2,600pcm.
While shared ownership conversations are now a staple of the London housing market given the cost of property, similar conversations are now going on up and down the UK as prospective buyers are faced with greater sums to secure their new home.
Dream.. turned into reality
Just as is seen with a two-bedroom in Wembley, shared ownership can be a route to alleviate some of these challenges. For many young homeowners, it can be one of the only ways to afford that first home.
In Newcastle, for example, a 25% share on a two-bedroom shared ownership property is available for as little as £35,000. In Leeds it’s £37,500, while in Liverpool it’s £40,000. This requires significantly less deposit to be saved than many similar outright purchase homes in the same neighbouring streets.
Emily and Tyler are a couple who bought a shared ownership property in Newcastle. For them, shared ownership made their dream of moving into their own home a reality.
Emily and Tyler get on the property ladder thanks to shared ownership
Having previously been renting a property in nearby Gateshead and keen to move back into Newcastle, they explained: “There’s no way we could go for a 100% of a house. It would have taken us years and there would have been no point at all.
“I loved the idea of shared ownership as you get all the benefits of owning the house outright and it’s much more affordable for us. We worked out that it’s about £2 extra a month from what we were paying in rent and having the option to up the percentage is really appealing.
“It’s a great option. None of our friends have an 100% mortgage on a house, most use this scheme or rent. It’s great for people our age who wouldn’t be able to manage a mortgage otherwise.”
Shared ownership is also making an impact in less urban areas, as the realisation that buying a house outright is a step too far for a significant number of people.
Deposit Boost scheme
This type of growing interest shows that the mindset towards shared ownership is changing in line with growing costs and a new generation of prospective homebuyers. Recent data from Leeds Building Society showed that an average of three out of five of all shared ownership buyers over the last three years bought homes in UK regions outside London and the South East.
Part-owning a home through shared ownership already brings down the high barrier to entry costs involved in the current housing market, with companies introducing further schemes to open up the dream of home ownership to more prospective buyers.
Through their Deposit Boost scheme, Persona Homes offer the opportunity to add an additional 5% to a customer’s deposit when they look to purchase a 25% share on a shared ownership development. This can help homebuyers secure better terms on their mortgage, help them purchase a larger or different home than they had initially set out to buy, or help them get onto the property ladder sooner than they may have believed possible.
Christopher Bond, Head of Sales at Persona Homes, said: “Everyone knows it’s been a real challenge for some time for people to get on to the property ladder. The past year or so - cost of living crisis, mortgage rate increases etc - has made that challenge insurmountable for many.
“It’s not surprising, therefore, to see the take up of shared ownership growing across the UK. Shared ownership offers a decent sized step on that ladder, with those steps increasing the more of that property you own as time goes by. A process called staircasing.
A place they can call home
“One of the issues in the past was that shared ownership wasn’t always fully explained. That has changed and buyers are aware of the way the process works in comparison to outright sale. That could be another reason for the higher take up we see today.”
With increasing numbers of shared ownership developments being delivered around the country and new grant funding through the Government’s £11.5bn Affordable Homes Programme (AHP) 2021-26 ensures a steady supply of new properties to the market, more and more buyers will be able to move out of their rented or parents’ homes into a place they can call home.
What is shared ownership?
Shared ownership works as a part-buy, part-rent scheme which provides first-time buyers and those who currently do not own a home the opportunity to buy a brand new property and spread the costs.
Those buying a shared ownership property are typically able to buy an initial share of between 25% and 75% of the overall value of the property. They will pay a mortgage on the share that they own, then pay a subsidised rent on the remaining share.
As the mortgage deposit covers only the share of the property being purchased it is often much lower. With large deposit demands being one of the most common barriers to entry for new homeowners, the ability to offset this can be the difference to getting onto the property ladder.