Shared ownership allows you to buy your home in sections – but one scheme also cuts the red tape and helps you to achieve full ownership faster
Shared ownership schemes can be excellent ways to get a foot on the housing ladder, especially in more expensive parts of the country such as London and the South East. Instead of buying a property outright, the homeowner buys a share, usually between 25% and 75%, and then pays a monthly payment to the housing association for use of the rest of the property. A process of purchasing further shares as the years go by is also available, with, in most cases, the eventual possibility of owning the home outright.
That’s the theory. The reality, according to developer Thames Valley Housing (TVH), is that the vast majority of shared ownership buyers never go on to completely own their own homes, and many don’t increase the share that they own at all thanks to the costs involved. A report by Cambridge University’s Centre for Housing and Planning Research, commissioned by TVH, found: “Some had looked into increasing the share they own in a shared ownership home but were deterred by the costs associated. Upfront costs (such as the valuation) were a particular barrier.”
Determined to increase the number of buyers taking advantage of the opportunity to buy a bigger share of their home, just over three years ago TVH launched So Resi Plus, a unique shared ownership scheme designed to allow faster home ownership. While the traditional method of increasing a share requires shared owners to buy a minimum of a 10% extra share at a time, and to pay for valuation and other fees each time they purchase extra shares,
So Resi Plus allows purchases of as little as 1% at a time, with no new valuation required. Shared owners on the scheme are allowed to buy an additional 1% share in the home every year for 15 years (up to a total of 79% of the home value).
In addition, under the So Resi Plus scheme there are no solicitors’ fees or valuation fees to pay when each additional 1% of the home is bought – instead, after the first year, the cost of the share simply increases at a flat rate of 3% each year. According to the most recent Land Registry figures, annual house price inflation across the UK is running at 4.53%, although the Halifax Price Index puts it at 2.7%, and the Right Move Property Index actually showed that prices in London dropped by 1.8% over a year, so of course shared owners would be advised to consider local house price movements carefully before making a decision to buy a larger share of their home.
This simplified process has resulted in a big increase overall in the number of shared owners who go on to buy a larger share. Analysing the results of the scheme, TVH found that while only 3.3% of shared owners managed to increase the share they own in a shared ownership home in the traditional fashion, 16% of buyers on So Resi Plus bought a further share of their home over a three-year period, and more than a third of those expected to buy even more in the next five years.
The scheme is proving popular with homebuyers as a 1% share is seen as a manageable amount to save up for, rather than requiring additional borrowing, and homeowners have the freedom each year to decide whether or not to make the purchase. Such has been the success of the scheme, that TVH has now extended it to existing buyers to help even more people increase their share in their own home.