With no end in sight to London’s housing crisis, investors are increasingly looking at ways to monetise Generation Rent with a series of alternative home ownership schemes funded by the private sector.
The latest offering out of the gates is a “gradual homeownership” proposition launched by Wayhome.
Over the past 18 months Nigel Purves, CEO of Wayhome, said that more than 80,000 prospective buyers had registered their interest in the scheme.
The first five will move into their homes later this summer.
Unlike traditional shared ownership models, run by housing associations and focussed on newly built homes, Wayhome is backed by pension funds and teams up with buyers to purchase resale properties costing between £200,000 and £500,000.
The buyers must have a household income of at least £30,000 and be able to put down a five per cent deposit. For a property worth £500,000 this would mean an initial £25,000.
Buyers also need to cover five per cent of buying costs, including surveys, solicitors, and Stamp Duty.
This investment allows the buyer to live in the property. They will pay rent to Wayhome on the portion of the property they don’t own which Purves said will be based on local market levels.
Once moved in the owners are responsible for the day to day maintenance of the property, although Wayhome will pay its share of any major structural work needed.
Dos and don’ts
If it sounds too good to be true it probably is. Companies are making money from you somewhere. Work out where, usually the rent you will pay, and whether it’s a good deal.
Read the small print and ask a lot of questions, particularly about fees and how buying and maintenance costs will be arranged.
Find out about any costs of upping your share in a property, and how the inevitable annual rent increases are geared. Work out how much you might be paying in a couple of years’ time.
Don’t overlook traditional sharedownership schemes. Their emphasis on new homes means they can be quite expensive, but they are an established route into full home ownership, too.
The only eligibility criteria is that buyers must have an income of at least £30,000 and a decent credit rating.
A key plus point of the offer is that it focuses on older properties meaning buyers don’t have to pay a new home premium or top-dollar service charges.
However, to keep to its under-£500,000 budget Wayhome’s offerings in London are mostly in budget locations including Edmonton, Morden, and Woolwich, as well as across the commuter belt.
While Wayhome will allow its customers to up their share in their property over time, it will only allow them to buy up to 40 per cent meaning that this is not a direct route into full homeownership.
However, when a buyer wants to move on, they will walk away with a share of the proceeds.
The scheme is the latest in a series of home-buying offerings coming to the market.
Players include Propertunity, which aims to assist a million people onto the housing ladder by 2030 by offering home buying loans to bridge the gap between what buyers can afford to put down as a deposit and raise through a mortgage and the actual cost of their home.
Then there is OnStep which allows buyers to select a home and negotiate a price. The company then buys the property (you will need to put down a five per cent deposit), and you commit to rent the property for at least five years before being able to sell up and take a 15 per cent share of any price increase.