The shared ownership scheme provides a lifeline for many people who would love to own a property but can’t afford to buy one outright. This scheme allows you to purchase a share of a new build property and pay rent on the remaining share that is typically owned by a housing association. This approach makes initial costs much more manageable while providing flexibility in ownership levels over time. However, one common question potential buyers have is how much rent they’ll have to pay. So, in this article, we’ll shed some light on this topic by discussing how the rent you pay on shared ownership new builds is typically calculated*.
Understanding Shared Ownership Rent Values
The rent paid in a shared ownership arrangement is not calculated like traditional rent. Instead, it is based on the market value of the portion of the property that you do not own. Typically, the housing association charges rent that is below the market rate for similar rental properties.
For instance, Bournleigh in Banbury is a shared ownership Sanctuary development with a range of property types including detached homes and apartments. The market value for one of the detached homes is £480,000 (with a 40 % share value of £192,000). The rent per calendar month on this property is £660. A ground-floor apartment in this development has a market value of £220,000 (with a 40 % share value of £88,000). In terms of rental costs, you would be looking to pay £302.50 each month.
The Benefits of Shared Ownership
Shared ownership provides an affordable pathway to homeownership, which is particularly appealing for those with limited initial savings. Here are the key advantages of this approach to homeownership:
Cost-Effective Entry
Shared ownership reduces the initial financial burden, allowing you to purchase a portion of a property and pay rent on the remainder. This arrangement lowers the required deposit and mortgage, making homeownership accessible sooner.
Gradual Ownership Increase
Buyers can usually incrementally purchase more of the property over time through "staircasing," which decreases the rent paid and gradually increases their equity. This flexibility is beneficial for managing financial commitments as personal circumstances change.
Access to Desirable Locations
This scheme often includes properties in sought-after areas that might be unaffordable through traditional buying methods. A Sanctuary shared ownership new build is built to a high standard and typically includes modern amenities, providing a higher quality of living and potential savings on utilities.
Stable Long-Term Housing
Unlike typical renting, shared ownership offers the security of ownership, ensuring stable housing while providing the opportunity to eventually own the property outright.
Investment Potential
As property values increase, so does the value of the purchased share, offering the potential for capital gains. This can provide a significant return on investment when selling or if one achieves full ownership.
Reduced Costs Over Time
Staircasing to increase ownership reduces transaction costs compared to buying a home outright, making the journey to full ownership more economical.
Getting on the Property Ladder is Easier With Shared Ownership
Shared ownership new builds are a compelling option for those struggling to enter the property market. The amount of rent you pay on the unowned share is generally affordable and calculated to facilitate easier homeownership. With proper planning and understanding, shared ownership can be a stepping stone to full property ownership and financial security.
If you would like some help with finding your perfect home through shared ownership, then our team at Sanctuary can help. Please contact us today if you have any questions or browse our developments to start looking for your new home!
*All figures quoted are approximate at the time of writing and are subject to change.