Shared ownership can work for some people, some of the time. But, if you’re a first-time buyer, it’s worth looking carefully at the pros and cons to assess whether it will work for you, given your own circumstances and your future intentions.
It can be time-consuming and, perhaps, a little confusing to figure out the positives and negatives of shared ownership. YouTube videos posted by shared owners discussing their own experience can be helpful. Obviously, be aware that some content is simply marketing posted by housing providers themselves, either directly or via paid influencers whose perspective might not therefore be entirely impartial. The Committee of Advertising Practice (CAP) publish advice on recognising ads in the form of blogs and vlogs.
Make sure you take appropriate professional advice too. YouTube videos can go out of date, and people can make mistakes! With those provisos in mind, here are a few YouTube videos which might offer a useful starting point. (This isn’t endorsement of these particular videos – no commission involved!).
Pros and Cons
This Adulting by Lola YouTube video (17 minutes) explains the things she took into account in deciding whether or not to buy a shared ownership home herself.
“Generally if you can only afford to buy 25% of the property the risks involved, and the gambling involved with staircasing, for me it was just too high. And I find it difficult to understand how people are justifying that sort of thing when they’re acquiring such low percentages in the hope that they will own more later”.
On the plus side: a lower deposit; and the possibility of getting on the property ladder.
On the down side: many shared ownership properties are new builds which can be more expensive than older properties; a smaller pool of mortgage lenders may mean less competitive rates; liability for 100% of costs despite only a part-share; service charges may increase over time; shared ownership provides a tenancy not ownership; and the fact that it may be challenging to staircase to 100% and hard to plan for doing so, given the unpredictability of what future shares will cost (valued at market value at the date of staircasing not original market value).
(NB. Re her statement that rent isn’t payable once shared owners have staircased to 75%, it’s not specified in the video that this applies only to the over 55s Older People’s Shared Ownership scheme where staircasing is capped at 75%).
Selling a Shared Ownership Flat
The second video (36 minutes and presented by Self Invested) covers Alex Marshall-Grant’s experience of buying a shared ownership flat in 2018 and selling it just under two years later when she wanted to move back to central London and buy a home outright.
When she bought her first share Alex was told that, because the affordability assessment suggested she could afford 65%, she wouldn’t be allowed to purchase a smaller share.
Unfortunately, when she came to sell she discovered that a 65% share is harder to sell than, say, a 25% share. Potential buyers who came to view her house commented that it was too expensive. Yet, her housing association told her if she wanted to accept a lower offer than the RICS valuation, she’d need to pay the difference to them regardless. Once eight weeks had elapsed without the housing association finding a suitable buyer, Alex was allowed to take her home to an estate agent to sell. Although she then had to pay additional fees to staircase to 100% in order to sell on the open market.
Alex’s top tip is to obtain as much information as possible about selling on, before you buy into shared ownership.