How to get on the shared ownership ladder in London

October 4, 2017

A generation ago the majority of young professionals would have never seen shared ownership as of the few only ways to get on the property ladder.

However a vast numbers of successful adults in their 20s and 30s today find themselves in the frustrating situation of being unable to buy a home outright.

Latest research from Halifax shows that an average first-time buyer in London must spend more than £410,000 on their starter home, and find a deposit of £100,000-plus. So shared ownership is perhaps the only option for young Londoners who don’t have family in a position to give them a six-figure leg up.

If you’re considering the shared ownership route, here’s our guide:

Is anyone eligible for shared-ownership?

  • Geographically speaking if you live or work in a London borough. Most schemes give top priority to those with a local link.

Can flats be purchased in any borough?

  • Some boroughs have very limited sites for the kind of large developments that include shared-ownership homes, and this applies to great swathes of Zones 1 and 2. Also, in areas where prices for one-bedroom flats top £600,000 even the tiniest share of one is not going to be affordable, so they tend to be offered for subsidised rent rather than shared ownership.

What’s the best location?

  • In the last year, shared-ownership flats have come up across the capital from Brixton to West Hampstead. Docklands, Canary Wharf other major regenerations zones, where thousands of new homes are being built and most developers are including substantial proportions of affordable homes in the mix, are a much more likely suitable option.

Can you buy in an area you don’t live or work in?

  • Changing jobs to give yourself the best chance of finding a shared-ownership home seems radical, but renting in an area where a lot of building is going on will increase your chances. The system is changing slowly, but most developments still give local priority.

 What’s the salary threshold?

  • The upper limit for people buying a shared-ownership flat is £90,000 per household. This means a singleton can earn up to £90,000 but if a couple are buying, their combined salaries must not top £90,000.

What’s the minimum income required?

  • There’s no set minimum income requirement to become a shared owner. Usually people with a household income of between £35,000 and £50,000 will be considered.

So how much will it cost?

  • Monthly costs vary but as a rule of thumb, most one-bedroom flats tend to cost about £1,000 to £1,400 a month to run, while two-bedrooms are about £1,800 to £2,200.

What about raising a deposit?

  • If you were buying a 25% share of a flat with a full value of £400,000 your share would cost £100,000. A 10% deposit would be £10,000, as opposed to £40,000 if you were buying on the open market. You also only pay stamp duty on the proportion of the property you are buying.

What proportion of the property will you be able to buy?

In principle anything up to 75% however, London prices being what they are, it is more usual for first timers to buy 25%.

Owning a 25% stake in a homes that you can stay in for as long as you like and do what you like with, is better than owning 0%.

How do you find out if shared ownership is right for you?

You should be very comfortable with the location and must not buy something you are going to outgrow in a couple of years, perhaps if cohabitating or children are on the horizon. Most shared owners stay in their homes for five or six years, which gives them enough time to build up a reasonable chunk of equity so that they can start “staircasing”, or increasing their share in their home.

For more information you can refer to the Government scheme page – www.gov.uk/affordable-home-ownership-schemes