Shared Ownership: the impact on conveyancers and its long-term viability for first-time buyers
As of April this year, the government have relaxed eligibility rules meaning households earning less than £80,000 and £90,000 in London can now use shared ownership schemes to own property. When the average national price of an entry level property now costs £140,000, should the first-time buyer look towards government shared ownership schemes as a first port of call more frequently in the future?
Achieving the life-goal of ‘homeowner’ is becoming incredibly difficult for first-time buyers, according to a recent report made by the credit experts, TotallyMoney. How can first-time buyers grasp a secure footing on the property ladder when the price of entry level homes has increased by 20% over the past decade? One possible solution lies in government shared ownership schemes.
However, the report has highlighted a naivety in first-time buyers’ knowledge of what a shared ownership scheme actually is; with only 28% of 18-24 year-olds having any understanding of the government scheme. Should the public be more aware of shared ownership and is this the future when buying a house for the first time?
The consumer group Which claim, “it can enable you to get on to the property ladder more quickly than you might if you wanted to buy a home outright; it may be cheaper than renting; and you can sell a shared ownership property at any time and will benefit from any increase in value it’s seen since you bought.” Although these obvious benefits, along with affordable deposits and subsidised rents, should be a consideration, only 19% of property buyers in the last ten years have used a government buying scheme; with only 6% using the shared ownership scheme. Why are buyers reluctant to use this method of home ownership?
Despite being an affordable option, the confusing reputation of shared ownership schemes continues to resonate and deter first-time buyers. Whilst the people eligible to use shared ownership options have increased, 38% of people surveyed by TotallyMoney would not consider a shared ownership scheme for fear of hidden costs. Giles Peaker, a housing solicitor at Anthony Gold solicitors, said “Despite owning 25% or 50% of the property, buyers have responsibility for 100% of the service charges. These can be variable and have to be paid on top of rent and mortgage.”
Other legitimate concerns include losing a “right to manage” voice as properties will always be maintained by the housing association, even when the contract to the property is owned in full. The inclusion of rigorous stipulations on sub-letting and potential conditions on reselling the property has also encouraged many first-time buyers to avoid the shared ownership option.
Even though this form of housing ownership should become a more popular option among first-time buyers, many are struggling with the confusing quagmire of stipulations once they use the scheme. Unless hidden costs become more transparent, unreasonable restrictions are relinquished and the scheme is promoted more successfully to a wider audience, it could struggle to help the 40% of first-time buyers, currently reliant on financial support from friends and family, to buy their first home.
As a conveyancer, are you finding more clients opting for a shared ownership option? What do you find to be the major struggles with this home buying option?