Affordable housing in the UK
How the government is supporting home ownership19th Aug 2020
At the age of 33, I am now a property owner. Words I never thought would come out of my mouth. Ever.
Home ownership after years of renting
I lived in Cape Town, South Africa, for seven years and I rented during that whole time. I moved back to the UK four months ago and have just completed the purchase of my first ever property.
It is an incredibly exciting, yet nervous and surreal time. The two-bedroom, one-bathroom apartment is part of an entirely new development in inner-city Birmingham, which is the UK’s second largest city after London.
The development is near completion, having started two years ago, and has just over 200 units. There is a nice mix of apartments and 2-, 3- and 4-bedroom homes in townhouse, semi-detached and detached options. A primary school borders the perimeter of the development; there is a secondary school across the road and a train station just further up.
Friends and ex-colleagues back in Cape Town have been questioning my sudden desire to buy property, especially in the midst of a global pandemic.
I guess the answer to that is that buying your first home seems to be so much easier in the UK, with several funding options available directly from the government. Nearly all are geared towards new-build properties, which is great when you consider that, despite no security gate or leisure amenities, this new development is probably the closest UK equivalent to the South African residential estate.
I first looked at the Bank of Mum and Dad option (known as the Guarantor Mortgage), as it seemed the one with least hassle. Only a few lenders offer this option, which is a bummer, and even less are willing to look at it now, given the current economic uncertainly. Those lenders that did offer the mortgage pre-pandemic essentially allowed parents to link their income with their children’s, so that the child could borrow more money, and at a better rate. The parents acted as sponsors, but their names were not listed on the title deed, which would be great for them.
I then investigated the Shared Ownership scheme, which lets the buyer purchase a minimum of 25% share of the new build property and pay rent to a housing association on the remaining 75% or less. You only need a deposit on the share you are buying and can purchase more shares later. However, the value of any future shares is based on the current value of the home, not the value when you purchased it, so you could end up buying less shares for more money. Another thing to consider is that when you come to sell the home, you only make a profit on the part you own.
Finally, I checked out the government’s Help-to-Buy scheme, which gives first-time buyers like me a loan of 20% outside London (or 40% in London), provided we have a minimum deposit of 5%. There are a few stipulations – you must be buying a new build property (tick) that costs less than £600,000 (tick), and you must be buying it to live in, not rent it out (also tick).
The government is essentially loaning you a deposit, so you will have to pay them back straight away – interest-free for the first five years and then with interest thereafter. The scheme is due to end in 2023 and the government haven’t yet confirmed if they will extend it.
First Homes scheme
However, they did recently announce another scheme, this time for first-time buyers, key workers, who were, and continue to be, instrumental in fighting the Coronavirus.
Under the First Homes scheme, nurses, teachers, police and military personnel who are looking to buy their first home can get a 30% discount on the purchase of any new build.
All the schemes listed above come with their own list of stipulations. Despite this, I think the UK government should be commended for at least making some effort to help first-time buyers, as well doing their bit to sustain the affordable housing market. If some of these schemes were available in South Africa, it probably would have propelled me to buy, and not rent, a home in Cape Town.