As an adult in her early thirties, I’m at the stage of my life where I’m ready to move out of my parent’s home into a property that I can call my own.
And as a born and bred south Londoner, there’s no question that London is where I want to stay. But taking even a brief look at market properties in the capital made me feel like this was unachievable. At least not without help from the bank of Mum and Dad, which just isn’t an option for me. So I’ve been looking into some alternatives. And one thing keeps cropping up in my Google search: shared ownership.
For people who want to stay near their family and community, shared ownership – which allows people to part buy and part rent their property – could give the opportunity to buy a share of a property in my home borough. With a small deposit (as low as 5 per cent of the property price) you can take a mortgage on a percentage of the property and then rent the rest. It could be a smart investment.
Shared ownership is mostly marketed towards first time buyers who are unable to purchase a home on the open market. Many properties on the shared ownership market are earmarked for long term local residents, for at least the first three months that the properties are on the market, giving local people like me a fighting chance of securing one before someone else does.
This sounds too good to be true. And perhaps it is. A new paper by Centre for London has recently suggested that there are problems with the affordability of shared ownership schemes. Yes, the deposits might be relatively low, but high house prices can make the burden of part buying and part renting a home very expensive. As a result, the city centre has become out of reach for many low to middle income Londoners. A property in Battersea, for example, requires a deposit of around £39,000 while in East Croydon you’d need just £4,375. Some people might recommend that I could just move further away, but I have strong family and social ties to my home borough. And there are other things that tie me to the area, such as medical care. As a Type 1 Diabetic, I have been lucky enough to receive long term consistent care from one trust for over 20 years and I couldn’t guarantee this if I moved further out.
I’m not the only one who would face such challenges.
With the median wage in London (£35,000 pre-tax) giving you take-home pay of £2,278 each month, it would take almost 14 years to raise a deposit for the Battersea property. Which makes me wonder who exactly is this part of the market catering to? And how many potential shared ownership buyers would still need help – by way of a wealthy family member – to purchase part of these properties?
And it is not just the purchasing costs Londoners need to worry about. Shared owners still have to pay 100 per cent of the ground rent and service charge, no matter how small their share is. Depending on any building works that the freeholder deems necessary, this could hike up costs by quite a lot, and there is always the possibility of nasty surprises if accumulated funds fall short.
Now the former Mayor of London and new Prime Minister Boris Johnson claims that he wants to help many more young people get onto the housing ladder.
“The change I want to see is … giving millions of young people the chance to own their own home”.
And he is looking at shared ownership to do this.
At the end of August, the Housing Secretary Robert Jenrick announced a package of measures to help people on lower incomes, including a review of a new national model for shared ownership to make it easier for people to buy more of their own home – including allowing them to buy in 1 per cent increments, as opposed to the current 10 per cent.
But it seems clear that the market in London will need some specific consideration. Let’s hope that the Prime Minister will remember his time as Mayor, and give the capital the flexibility it needs to help more people begin to buy their own home.