Demand for shared ownership homes set to double - Savills

Demand for shared ownership properties will rise by over 15,000 units a year when Help To Buy comes to an end in spring 2023, according to Savills.

Shared ownership properties are widely regarded as a ‘difficult sell’ for those agents involved in the sector, but Savills insists that it will become the natural successor to Help to Buy. 

“Already home to over 200,000 households, it is set to be the only major route to home ownership for people unable to meet the high deposit required to buy their own home without assistance” says Lawrence Bowles, Savills’ residential research analyst. 

“It also supports the delivery of much-needed new housing by allowing housebuilders to diversify the type of stock they build, increase rates of sale and reinvest their capital more quickly.  By selling to housing associations in bulk at a slight discount, they can move onto the next site faster.”

Currently, around 40,000 households become first time buyers each year through the Help to Buy equity loan.  Of these, just over a third are thought to be unable to buy without the scheme.

Savills says that if this demand switched en masse to shared ownership, new supply would need to increase by over 150 per cent; more than 13,400 new shared ownership homes were completed in 2018.

The firm says that given the same deposit, buying a 50 per cent share of a shared ownership home and Help to Buy have very similar monthly costs for the purchaser - each being around three quarters of the costs associated with full home ownership.  

But shared ownership deposit and income requirements are lower, since buyers need to fund a mortgage only on the share they buy.  

The minimum requirement, assuming a 25 per cent share, is just 1.25% of the value of the property - that is, a deposit of just a quarter of the minimum five per cent deposit. This compares with a full five per cent minimum deposit for Help to Buy.

Savills also calculates that shared ownership is the only route to home ownership with a five per cent deposit for those earning below the average median annual income of £28,677.

However, in the long term this could work out more expensive as the rent portion of shared ownership costs rises at a premium to inflation - meaning monthly costs will rise faster than for full ownership.  

At the end of a 25 year mortgage term, this ultimately means shared ownership becomes more expensive than full home ownership, assuming no re-sale has taken place.