There's no denying the fact that house prices have soared over the last year or so, and even though there are signs that this rapid pace of growth is easing, it won't come as any consolation to those still struggling to get on the housing ladder. First-time buyers (FTBs) have found things particularly tough, and that's why a lot of people are asking whether shared ownership could have more of a role to play in the housing market's future.
According to latest figures from the Council of Mortgage Lenders, there were 30,200 mortgages advanced to FTBs in July, an increase of 3% from June and 25% higher than July last year. However, the typical loan size for first-timers has shot up, reaching a record £127,500, while the proportion of their income that goes towards repayments – 19.6% – has also increased, up from 19.3% in June.
Happily, it's still a long way off from the recent peak of 24.8% recorded in December 2007, but if house prices keep heading upwards, it may not be long before the market gets to that stage.
The figures come a week after the CML published its latest industry report, 'A housing market to be proud of'. Touted as being a "manifesto" for the next election, the report outlines what it hopes the core political parties will focus on in the coming months, including the actions and decisions that it believes politicians should take in order to "deliver effective housing solutions for the future".
A lot of it is focused on young or would-be homeowners, and argues that the main issue facing the younger generation is the sheer cost of housing. As such, the CML calls on the Government to focus on measures that would increase the supply of housing, reform stamp duty and, perhaps most noticeably, "recognise that, for many, shared equity/shared ownership is becoming a permanent tenure, rather than a stepping stone to full ownership".
Considering how quickly prices are rising, and how difficult it is for FTBs to get that first mortgage – not to mention how tough it can be to service it thereafter thanks to the increasing amount they have to spend on repayments – it's no wonder that shared ownership is coming back into the foreground.
It's certainly a growing trend, as figures from the National Housing Federation show. According to their research, sales of shared ownership homes have increased by 56% since 2009, but only a third have been able to buy their whole home over the past decade. They also predict that, by 2020, 3.7 million young people will be living with their parents, and by 2030 house prices will be 13 times the average salary – meaning that shared ownership could become an even more popular option.
According to CML data, even though the number of first-time buyers has soared over the last year, overall numbers are still languishing at around half their long-term average of approximately half a million. Again, it's all down to cost – their calculations show that house prices have doubled since the mid-90s while earnings have only risen by some 21%, and the continued lack of housing supply will only serve to bulk up house prices further. Getting that all-important deposit is the key barrier, and is likely to remain so for some time.
All in all, it means that house price growth is putting full homeownership out of the reach of many, and it could be an even more unlikely dream in the years to come. However, the Government has stepped in with the Help to Buy scheme – the equity loan element means people can buy a home with a deposit of just 5% and a mortgage of 75%, as the Government will provide an equity loan of 20% to cover the remainder – and it looks like it's having the desired effect.
Privately-operated shared ownership schemes are slightly different, but still operate under the same principles. Borrowers can purchase a share of a property – typically 25%, 50% or 75% – and pay a form of subsidised rent on the rest. They only have to raise a deposit for the amount of the property that they own, but they can buy more of the property over time – a situation known as "staircasing".
There's a lot more to it than that, but these kinds of low-cost homeownership schemes could well provide the solution. They have the potential to help more young people realise their aspirations of becoming home owners, giving them the chance to buy more of their property over time – owning a home outright will of course still be the ultimate dream – and if the Government stepped in to make these schemes more attractive and easier to understand, say the CML, it could be even more viable.
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