Own your own home - without breaking the bank
Western Mail: 27 June 2007
“The promise of a property-owning democracy must be open to all those wanting to get on the housing ladder for the first time.” So said tomorrow's Prime Minister Gordon Brown this week. Here housing association director Darrell Bolton sets out his own vision for the housing market.
Owning a property is many people's dream. Collecting the keys and opening the door for the first time ranks as one of life's most exciting milestones.
However, in Wales this ambition is fast disappearing from the reach of thousands of first-time buyers, as well as people who need to re-enter the market after changes in their personal circumstances.
House prices have soared in recent years and, coupled with interest rate rises, this is pricing many potential buyers out of the market.
In fact, new research by the housing charity Shelter shows it is almost twice as hard for first time buyers to climb onto the property ladder compared to 10 years ago.
House price rises are now way ahead of wage growth, but first time buyers still persist in their valiant pursuit of a foothold on the property ladder. They are opting in many cases for unrealistic and potentially crippling mortgage deals.
One hundred per cent mortgages; parents raiding their savings to contribute to deposits; and lenders advancing up to six times annual salaries – all are becoming common place as people stretch themselves to realise their home ownership goals.
With these approaches carrying high levels of financial risk, more people are now considering alternative options.
One increasingly popular route is joint ownership or joint equity with many friends and family members clubbing together to share the cost of buying their first home. In some instances, potential co-ownership partners meet via websites, specially designed to place potential first time buyers in touch with each other.
Although this approach enables people to spread the cost of buying a property, it can prove problematic if legal contracts are not securely in place to protect against fall outs.
Aware of the housing crisis and huge pressure on first tie buyers, the UK Government has been driving forward major plans for affordable home ownership via first time buyer initiatives to provide much needed financial assistance to help both families and individuals onto the housing ladder.
In Wales, the housing crisis is growing day by day, and the current predictions estimate an increase of 20% in population over the next 20 years.
Add to that the fact that wage increases have not kept pace with the increases in property prices, we have a real problem. Our own experiences show that in some parts of south east Wales, property prices are nine times average wages. So what's being done?
Affordable home ownership schemes are funded by the Welsh Assembly Government and are operated locally by housing associations, which are independent housing organisations regulated by the Welsh Assembly Government.
Local authorities are also focussed on making affordable housing available for communities. One route which is becoming increasingly important is through planning powers.
Local authorities are ensuring that on all new developments above a certain size, a proportion of properties as allocated as affordable homes. They can be for rental or for affordable home ownership.
One of the key schemes currently being promoted is homebuy which allows potential buyers to purchase a new or existing property.
Homebuy is targeted at people who cannot afford the full price of the mortgage on a property, but who have sufficient income or savings to be able to afford a mortgage on 70% of the purchase price. The remaining cost (30%) is then met through a loan from the housing association.
The real benefit to first time buyers is that there are no rental repayments or monthly repayments on a loan. Instead the 30% is repaid when the property is sold or bought outright and this figure is based on the current market value of the property.
Interest in such schemes is growing rapidly and demand is outstripping supply.
With the current housing shortage and high property prices, first time buyers have little choice but to opt for more affordable alternatives to realise their property owning dream.
Affordable home ownership schemes such as Homebuy present people with a realistic solution to the current spiral in house prices.
With the Welsh Assembly Government, local authorities and housing associations backing such home ownership initiatives, it could help realise the dream of home ownership for thousands of people.
Darrell Bolton is Director of Fairlake Properties which has helped nearly 1,000 people to access affordable home ownership. Fairlake Properties is a member of the Seren Group.
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