Shared Ownership: when share of something is better than nothing

Shared Ownership is a method in which several unrelated parties can share in, and mitigate the risk of ownership of an asset. This concept is generally applied to those expensive asset, such as a yatch, a jet or piece of resort real estate.

With regard to properties, it is a sort of part-buy, part-rent system. Indeed, the purchaser buys a stake in a property, between 25% – 75 per cent, and then pays a subsidised rent on the share they don’t own. The rent charged, also known as Intermediate Rent (IMR), is normally lower than a similar home in a similar area. In addition, over time, shared buyers have a right to purchase additional shares in the property until they own 100% of the equity. At that point the house is no longer a shared ownership property.

The intention of Shared Ownership is to provide a first step into home ownership ladder for those who cannot afford to purchase a home at the market value.

Most shared ownership properties are granted by housing associations or local authority housing, that enables residents and workers of the Borough to buy a share of a newly built property at discounted price through the Shared ownership schemes. Housing associations also have also the right to review the annual rent on shared properties, but the increase is always regulated by the Government and it cannot be raised at random.

Whether shared ownership provides a financial advantage over renting is a constant debate.

Many claim that it can be a cheaper option than renting; by paying a smaller mortgage, share ownership buyers pay a subsidised rent on the share of the property they don’t own.

Whereas someone argues that shared ownership homes can be more costly than traditional ones and if there is a London property bubble, share ownership buyers will be more affect than those who own the whole property, as they won’t be able to sell for what they paid.

In reality, there is far more regulation for share ownership homes than on the open market and shared ownership is also a way of spreading the risk. In fact, in the unfortunate event London house prices crash, shared ownership buyers will certainly be less affected than traditional buyers.

In today’s economic climate, shared ownership can be a good opportunity for young professionals to keep up with London’s property prices and for those who cannot afford to buy a home outright.

At the end of the day, share of something is better than nothing if you can’t afford to buy otherwise, as the share you own will be worth that much more.

 

 

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