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Last Updated: Wednesday, 25 May, 2005, 12:47 GMT 13:47 UK
Q&A: Shared-ownership schemes
House keys
What does shared-ownership offer struggling first-time buyers?
The government wants more homes to be built across the UK and to make it easier for people to take their first step on the property ladder.

BBC News looks at the plans and what one of the key initiatives - greater shared-ownership - offers first-time buyers.

What has been announced?

Chancellor Gordon Brown and Deputy Prime Minister John Prescott have announced a series of measures to boost the UK's housing stock.

The measures include the extension of state sponsored shared-ownership schemes.

In addition, state-owned land will be sold off to developers under the proviso that they make some of the homes they build affordable to first-time buyers and key workers.

Both these proposals form key parts of the government's housing strategy. The big idea behind the strategy is to bring to an end the UK's cycle of housing market boom and bust.

Academics working for the government have identified a huge gap between housing supply and demand as the main reason for periodic runaway house price inflation, which is often followed by a market bust.

The theory is that if more homes are made available, house price inflation will be lower but more sustainable. Slow growth will replace the cycle of boom and bust.

Making more homes available should also ease the plight of key workers and other people looking to buy their first home.

I want to buy my first property but can't afford to do so, what does shared-ownership offer me?

Essentially, under a shared-ownership arrangement you buy half the property and a housing association buys the other half.

The half that you don't own is rented back to you, but at a later stage you have the right to buy the housing association's half.

The idea is that the initial outlay to buy a property is far smaller than is usually the case and, as a result, people who would not be able to own their own home are able to do so.

House details, mortgage leaflet and calculator
Many homes are unaffordable to first-time buyers

In addition, most shared-ownership properties are new or recently refurbished, and in theory should be cheaper to maintain.

Under the plans announced by Gordon Brown, the government and mortgage lenders will enter the shared-ownership market.

One idea is to broaden the scope of shared ownership - at present many housing associations limit their clients to key workers such as teachers and nurses.

In future, many people who are not key workers may have a bite at the shared-ownership cherry.

What are the pitfalls of shared-ownership?

It depends on the terms of the shared-ownership.

Some agreements allow shared homeowners to do what they want with the property, such as renting a room. Other agreements can be quite restrictive.

For example, some housing associations insist that shared homeowners ask their permission before redecorating, fearing that an eccentric choice of decor could damage the value of their share of the property.

There may also be problems when it becomes time to sell.

Some shared homeowners face restrictions on who they can sell their holding in the property too.

If a housing association only deals with key public sector workers, it may not approve the sale of a share in the property to someone working in the private sector.

Does shared-ownership represent the future for first-time buyers?

For many first-time buyers shared-ownership may provide the only route onto the property ladder.

Currently, the number of first-time buyers is at a record low. In some areas average house prices are four, five and even six times average incomes.

"Buying a home in a standard way is unaffordable for most first-time buyers," Helen Adams, of Firstrungnow.com - which offers advice to first-time buyers - told BBC News.

"Using shared-ownership or buying with a friend, relative or partner may be the only way in future for young people to realise their property owning ambitions.

"The time of first-time buyers being able to do it all on their own has largely come to an end, unless house prices fall dramatically."

What impact will the government's plans have on house prices?

In their present form the plans are unlikely to close the gap between housing supply and demand.

According to a government sponsored review into the UK housing market published in 2004 by Monetary Policy Committee member and economist Kate Barker, the UK needs to build an extra 120,000 homes over current levels each year in order for supply to meet demand.

It is through increased supply of housing that long term house price inflation will be kept in check, Ms Barker concluded.

During 2003, the last year for which official figures were available, 189,820 new homes were built in UK, the vast majority by the private sector.

As for the extension of shared-ownership, the government estimates that 100,000 extra people could be helped onto the property ladder over the next five years.





BBC NEWS: VIDEO AND AUDIO
Watch Gordon Brown and John Prescott launch the plan



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