Shared ownership schemes are failing to help first-time buyers get on the property ladder because they are too expensive, according to new research by Which? Mortgage Advisers.
Its research has revealed that most young people cannot even afford the minimum share in Greater London.
When average monthly costs – mortgage repayments, rent and service charge – were compared with average salaries, the majority of one-bedroom properties in and around London were found to be out of reach for most people aged under 30.
Shared ownership involves buying between 25% and 75% of a property and paying rent on the remainder, which is owned by the local housing association. The rent you pay can be up to 3% of the association’s share of the property’s value. For many people struggling to save up a large enough deposit to buy a home of their own, shared ownership offers a lifeline.
Anyone with a household income of less than £80,000 outside of London and £90,000 inside London is now able to buy a shared ownership home.
Which? found that those under 30 earning on average £27,900 would not meet the affordability test for three-quarters (76%) of the properties and would need to earn £37,300 to afford repayments.
Not one of the 28 properties located in Zone 1 was affordable for the average person under 30 and of the 77 properties looked at in Zone 2, 90% were unaffordable.
A recent report found that the number of shared ownership sales varies considerably across the UK, with London accounting for the highest proportion.
For the studio and one-bedroom properties Which? looked at you would need to be earning more than £37,300 a year for them to be affordable, while the average annual salary for under 30s is just less than £28,000, putting shared ownership out of reach for many. In fact, the average income of first-time shared ownership buyers in 2015-16 was £45,000 in London.
David Blake, principal mortgage adviser at Which? Mortgage Advisers, said: “This research demonstrates the impact of rising house and rental costs in the capital. Buyers need to be realistic about what they can borrow, and I would suggest that they look at numerous properties as rents can vary considerably.
“That said, it’s not all doom and gloom as the mortgage market is very buoyant right now and lenders certainly have an appetite to lend to first-time buyers.”
