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 paid can be up to 3% of the association’s share of the property’s value.
However, research by consumer group Which? found most studio or one-bedroom properties in and around London are still out of reach for many under 30s, when average monthly costs such as mortgage repayments, rent and service charges are compared with average monthly salaries.
Which? looked at 525 shared ownership properties within a 20-mile radius of central London. It found under 30s earning an average salary of £27,900 would not meet the affordability test for three-quarters (76%) of the properties. They would need to earn £37,300 to afford the repayments.
It also found not one of the 28 properties located in Zone 1 was affordable for the average person under 30 and of the 77 properties in Zone 2 90% were unaffordable for under 30s.
The average income of first-time shared ownership buyers in 2015-16 was £45,000 in London.
David Blake, principal mortgage adviser, 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.”
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.