First-timers are still able to get into the property market – by part-buying.
Rossi Brown is 22 years old but she and her fiancé Sam Gardner have just moved into a smart flat with two double bedrooms in Bournemouth. It is on the third floor of the turret of a new development called b-central and has a circular living room with huge panoramic windows and stunning city views. Rossi and Sam are not rich young executives, yet they have found a way to purchase the lifestyle.
They’ve done it by part-buying. Together they have bought 35 per cent of the flat and pay rent on the rest – a process known as shared ownership which increasingly is the only way first-time buyers can get a foot on the ladder. At a time when surveys show that seven out of 10 potential first-time buyers have given up hope of ever owning their own homes, shared ownership is an attractive solution.
“We wanted to buy now while the market was low and decided we could afford a small part of a property,” Rossi says. “That way, if we get into negative equity the price drop will only be on a small share.” A two-bedroom at b-central starts at £169,950. If you took a 25 per cent share with a 10 per cent deposit, monthly mortgage repayments would come to £270, rent £372, and service charges £127 – a total of £769 per month.
This is not social housing as we came to think of it in the past. It is chic and glossy. The flat has its own balcony, secure parking and a lift to all floors. Rossi and Sam’s aim is to “staircase”, or buy more of the flat in years to come. “The views are amazing,” Rossi says, “and we think the resale potential is good. We hope to be here for at least five years, by which time the market will have picked up. Even if we’ve bought only 50 per cent by then, we will be more than happy.”
She knows the business because she works at Nationwide. “The shared ownership idea is not advertised hugely by lenders or mortgage advisers and yet it is the ideal way to get into property,” she says.
David Orchin, sales manager at Assettrust Housing, which handles b-central, says he is increasingly seeing parents buying a share for their children, who then take on the rent. “Parents are taking significant shares of £30,000 to £200,000,” he says. “I would say that 20 per cent of buyers are now parents.”
One example is James Hudson, a teacher from Grimsby whose daughter Rachel was studying law at Manchester University. “She lived in halls for a couple of years and I felt we were throwing away money on the rent. I don’t have enough money for a full-blown purchase but wanted her to have somewhere clean, safe and well-appointed,” he says.
He looked at many shared ownership schemes and found they tended to be targeted at key workers (nurses, teachers, police employees). Then he stumbled on Assettrust, which puts key workers first but then sells any surplus on the same basis to all-comers. “I bought a 15 per cent share without a mortgage, using a lump sum,” he says. “So it was a very low share and Rachel could pay the rent on the rest. As it was a two-bedroom flat she could take a tenant which would help with the rent.” One-bedroom flats at Pall Mall House, priced at £99,950, can be bought on a 25 per cent share with monthly rent and mortgage outgoings of £489.
“It has been a good halfway stop which has allowed her to find out about running a home, paying council tax and utility bills,” James says. He did, however, buy before the house price crash. So has he lost money? “I probably have lost a little but I didn’t put a huge amount in and she is going to stay a bit longer, so I think we will be all right. But she has somewhere safe and nicely finished, with double locks, security system and caretaker on hand, and I can’t help thinking that when we sell there will be others wanting the same thing.”
1 Most schemes, though not all, require you to earn less than £60,000 a year to qualify.
2 Some sell only to key workers.
3 You can usually buy between 25 per cent and 75 per cent of the property.
4 To sell you must allow the supplier eight weeks to sell first, then you are free to take your part or the whole to the open market.
5 Watch for service charges – they can be high.
The Telegraph 28.07.2009