In a move to assist in the Government’s drive to help young people get onto the property ladder, proposals were unveiled at the end of August by Housing Secretary Robert Jenrick in respect of a new model for shared ownership.
The most obvious change is the removal of the need to increase one’s share of ownership in chunks of 10%, which can cost up to £45,000 at a time. Instead this 10% limit has been reduced to 1%, thus allowing the opportunity for shared home owners to increase their holding in smaller steps providing greater affordability. This does of course open the question as to the ultimate price for increasing ownership 1% at a time, will shared home owners require professional services amounting to a cost of the same value as to those increasing their share by 10% every time they increase their ownership by 1%? The answer is most probably not, but this would always need to be considered in the context of the overall values involved and certainly if any additional borrowing was required then these costs will be necessary.
The Housing Secretary also announced his intention to review and reform the planning system to facilitate increased build levels, particularly in areas where properties are less affordable. Included within these plans is the potential to increase the number of houses sold at discounted prices, with the intention being to increase home ownership and increase local support for new developments.
Additionally a loophole was closed as part of the drive that previously prevented people taking out a mortgage in excess of 25 years. This removal will allow more people on lower income levels to enter the mortgage market with repayments being at a more affordable level.
Whether there is any need to reform Stamp Duty Land Tax is a matter for another day. Certainly first time buyers who purchase properties in higher value areas and are exposed to the 5% SDLT charge on values in excess of £300,000 may well find calculations for the purchasing of 1% chunks complicated, especially if they’ve opted to pay under the instalment option.