House prices and interest rates are dropping, but times are still tough for anyone waiting to get on to the property ladder. With banks loath to lend to anyone who hasn't got a big deposit, many potential buyers are missing out on a way that they can secure themselves a smart, affordable city pad.
While many of us will have heard of shared ownership – buying a share of a property through a housing association – few people realise that restrictions have been lifted and that households earning £60,000 or below are now eligible. The stereotype of having to be a teacher, nurse or firefighter to qualify for "key-worker" schemes no longer applies, and today's buyers include many diverse professions. And if the phrase "shared ownership" conjures up images of inferior estates, then think again, says Mark Vaughan, director of home ownership for one of London's largest housing associations, Notting Hill Housing. "Most clients are young professionals aged between 25 and 40 who want to be based in the heart of the city. They appreciate what we're offering, which is well-designed, award-winning, smart city apartments."
Shared ownership is growing in popularity, but in recent years housing associations have struggled to compete against private developers in the search for prime development sites. As the recession bites, developers are struggling to offload their products and associations are better placed to buy land. "Developers aren't currently looking for prime sites as many can't sell the properties they've built. Land prices have dropped, so we've recently secured great London locations where people love living, such as Camden, Kentish Town and Old Street," says Vaughan, pointing to the recent trend whereby developers are marketing their own forms of shared ownership based upon part-rent, part-buy schemes, often in partnership with housing associations. "Some are very good, but buyers must always be cautious. Get a solicitor to look through the contract and check when you have to buy extra shares, when the repayments kick in and what interest you will be charged."
Shared-ownership schemes aren't restricted to new-builds. The Open Market HomeBuy scheme allows buyers to purchase any property on the open market via estate agents and then apply for a low-interest loan through a housing association. HomeBuy Direct is the latest shared-equity scheme introduced for selected new-build homes. Buyers must be able to afford 70 per cent of the purchase price, through a mortgage and savings, and the housing developers and government will jointly fund the remaining equity. No deposit is required, but a low-interest payment is required on the equity loan after six years. There are also special initiatives for first-time buyers and schemes that allow house hunters to rent their homes first and then have 75 per cent of their rental money returned, which then forms a deposit.
These flexible schemes can save many considering home ownership substantial amounts. Your only restriction may be where you live, but profession, age and income should not be a barrier. Genesis Homes has a selection of properties on offer for shared ownership, including Horizon near Brixton's famous lido in Zone 2 of the London transport network, where one- and two-bedroom apartments start from around £66,625 for a 25 per cent share. Sales so far have included accountants, architects, engineers, journalists, TV producers and even a reptile breeder, and all are saving on what they would be paying on the open market, according to Genesis Homes' deputy director, Sharon Cummings. "At our Factory Quarter development in W3, buyers purchasing a one-bedroom apartment on a part-buy, part-own basis pay £826 per month versus the £1,231 it would cost to privately rent on the open market."
Against a rising tide of repossessions across the country, shared ownership also protects home owners who find themselves unable to meet mortgage payments. Buyers typically have to find smaller deposits and take out smaller mortgages, and many associations such as Notting Hill Housing will buy shares back from owners who are struggling financially. Buyers who are worried that the market is falling and are unsure whether to buy are also protected, since any future shares they buy are set at the market rate even if prices have dropped further, in a system known as "staircasing".
Adeline Towers, 22, works in merchandising and has bought a 30 per cent share in a one-bedroom flat through Notting Hill Housing. She admits that initially she was confused by the idea of shared ownership. "I thought that these schemes were only for nurses or teachers, but I lived in the borough and that was enough for me to get on to the scheme." Adeline had wanted to buy for some time, but believed that home ownership was out of her grasp. "I couldn't have afforded to do it any other way. I had no deposit and was living at my dad's."
After driving past the billboard at 661 London Road in Hounslow, which was advertising for first-time buyers, Adeline called the number and received an information pack. Within weeks of viewing the show flat, the property was hers and she's now enjoying living in a peaceful location within easy reach of her job. She hopes one day to own her home outright. "Becoming a home owner feels great: it doesn't feel like I'm throwing my money down the drain. I hope to staircase upwards and buy further shares with a view to owning the flat outright as soon as possible."