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Snags of shared ownership
With a large number of first-time buyers effectively priced out of the London housing market, the Chancellor Gordon Brown's recent budget commitment to deliver more low-cost, shared-ownership properties over sounds like a positive move. But what exactly is shared ownership and will it really help people take a step onto the housing ladder?
Shared ownership schemes have been around for a while and usually involve an organisation, such as a housing association or sometimes a developer, sharing ownership of a property with a private buyer.
Initial shares tend to range from 25 to 75 per cent, with the buyer paying a mortgage on their share, and paying rent to the housing organisation for the rest. Then, if at a later date, you decide to sell up, you split the profits according to your shares.
Clearly, there are plenty of benefits with a scheme like this, not least that it breaks the price of a property into smaller, more affordable chunks. You can buy further shares as your income grows, possibly even buying the property outright over a period of time.
Shared ownership can help people to get off the relentless treadmill of renting, allowing them to at least use their money to invest in a home. They might even make some money if the property value increases.
However, although there are lots of good points to shared ownership, there are things to watch out for.
One of the problems with shared-ownership schemes concerns availability. Despite the Government commitment to increase the number of properties available, the vast majority of shared-ownership schemes give priority to those people on social housing lists and to key workers.
Although shared ownership properties may be more affordable to start with, changes in the property market can still cause problems, and it is not just falling prices that are bad news. Sharply rising prices could make it hard to afford to buy further shares, preventing the opportunity to move any further up the ladder.
Then there are the running costs. It is worth remembering that, as a part owner, you will also be a part-tenant and, as such, you are likely to have a number of restrictions imposed by the landlord they may even reserve the right to dictate who the property is sold on to in the future in order to keep it as part of a shared ownership scheme.
As owner, you will also be liable for all maintenance costs and will probably also have to pay an annual service charge. You may also have to get the landlord's approval for any alterations. If you do pay for alterations which increase the value, you will end up sharing the profit with the landlord when you sell.
Having said all that, for many people, shared-ownership schemes do provide the answer to their home-buying problems and are perhaps the only affordable way for them to invest in property in the capital.
The Housing Corporation web site at www.housingcorp.gov.uk has a database of all UK housing associations. You can also find out more about government schemes such as Homebuy on www.odpm.gov.uk