Research finds shared ownership is still too expensive for many first time buyers

Shared ownership schemes in the UK designed to help first time buyers onto the housing ladder are still unaffordable and put the majority of properties out of reach, new research has found.

A report from consumer organisation Which? reveals the true scale of how unaffordable shared ownership schemes are in some areas, particularly Greater London.

Most young people cannot even afford the minimum share and the minimum share of a studio or one bedroom shared property within a 20 mile radius of central London is impossible for most people aged under 30.

Shared ownership involves buying between 25% and 75% of a property and paying rent on the remainder, which is owned by a local housing association. The rent paid can be up to 3% of the association’s share of the property’s value.

For many people struggling to save up a large enough deposit to buy a home of their own, shared ownership offers a lifeline but the research found that when you compared the average monthly costs of mortgage repayments, rent and service charge for people with average salaries the scheme is still unaffordable for many.

Anyone with a household income of less than £80,000 outside of London and £90,000 inside London is now able to buy a shared ownership home but the research found that under 30s, earning on average £27,900, will not meet the affordability test for 76% of the properties in London as they would need to earn £37,300 to afford repayments.

Not one of the 28 properties located in Zone 1 was affordable for the average person under 30 and of the 77 properties the research looked at in Zone 2 some 90% were unaffordable for under 30s.

A recent report found that the number of shared ownership sales varies considerably across the UK, with London accounting for the highest proportion. For the studio and one bedroom properties that Which? looked at a buyer would need to be earning more than £37,300 a year for them to be affordable, while the average annual salary for under 30s is just less than £28,000, putting shared ownership out of reach for many. In fact, the average income of first-time shared ownership buyers in 2015-16 was £45,000 in London.

‘This research demonstrates the impact of rising house and rental costs in the capital. Buyers need to be realistic about what they can borrow, and I would suggest that they look at numerous properties as rents can vary considerably,’ said David Blake, principal mortgage adviser at Which?

‘That said, it’s not all doom and gloom as the mortgage market is very buoyant right now and lenders certainly have an appetite to lend to first time buyers. Shared ownership can be a great way of getting onto the property ladder, but it’s not the ideal solution for everyone,’ he added.

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