The government’s proposed changes to shared ownership is a development that will open up the market to thousands of buyers.
The scheme will be changed so buyers will only have to purchase a minimum stake of 10% of a property, down from 25%. They will also be able to buy 1% shares in homes, up from 10%.
Reaction to the news from the property industry has been largely positive, but there’s still cynicism from some quarters.
The truth is there are a few barriers that likely prevent it from being mainstream, some of which are unlikely to be improved by the reforms.
Firstly, the scheme is only used with housing association properties, and the availability of such homes varies up and down the country.
There’s already lots of competition for these homes, so we clearly need more of them if we’re to open up the market to anyone who can come up with a deposit of a couple of thousand pounds.
While we’re likely to see more demand after these changes come into force, shared ownership is something that doesn’t appeal to everyone, and I don’t see that changing.
If you buy a 10% share of a home that means you have to pay 90% of the housing association’s rent without having any of the usual benefits of renting, like flexibility to move house with few strings attached.
Unless the rules get changed you only purchase a leasehold rather than a freehold, meaning you need to pay ground rent.
Other downsides are potential restrictions on how you can alter the property, while when you sell you might first have to offer it back to the housing association.
Another big factor involves staircasing, where you buy more shares in the property.
Currently when owners staircase there are costs involved like surveys and legal fees, so going through that for an extra 1% of ownership seems a bad move.
That’s not to mean I’m discounting the value of shared ownership entirely.
Indeed, the scheme least provides a route to homeownership without having people saving tens of thousands of pounds.
However I’m just not sure it’ll ever become a mainstream solution to first-time buyers struggling to get on the ladder.
A better solution in my book is to keep house prices in check by limiting artificial stimuli to prop up the housing market, like the stamp duty holiday.
That way buyers don’t have to come up with enormous deposits.
The government should look to boost housing supply to keep prices in check.
They could do this by encouraging competition amongst housebuilders, rather than having the housebuilding industry be dominated by a few big names.
Shared ownership has a place, I just don’t see it as a solution for first-time buyers en masse.
Ryan Bembridge, Editor, PropertyWire
