2015 | Joint Equity

How much do you need to earn to buy a home? It ranges from £24k to £97k

A ‘chronic shortage’ of homes for sale in Britain’s cities has helped to push house prices up in urban areas by more than 10 per cent this year. It means buyers need to earn significantly more than a typical wage before they can own a city home.

New figures suggests that out of 20 major cities in Britain, the average household income needed to afford a home with a typical 76 per cent mortgage is £49,700, up from £45,000 a year ago.

But the range is significant – from less than the average wage at £24,000 in Liverpool, to a staggering £80,200 in Oxford and almost £100,000 in London.

The research by Hometrack found those buying in Liverpool need a smaller deposit at £26,500, compared to £88,700 in Oxford and £108,000 in London.

The weakest rate of growth has been Aberdeen, where average house prices have dropped 2 per cent following a 12 per cent increase the previous year.

The city with the strongest turnaround in the past year has been Glasgow, where growth has jumped from 1.8 per cent to 8 per cent as prices recover from a relatively low level in one of the most affordable cities covered by the research.

Hometrack blamed a lack of supply, created by strong demand from investors along with a low number of existing homeowners who are moving. The latter group accounts for 33 per cent of housing sales today compared to 50 per cent in 2007.

Richard Donnell, director of research at Hometrack, said: ‘The scarcity of homes for sale looks set to remain a feature of the market in 2016. This will only ease once we see greater levels of output from home builders and renewed activity among existing mortgaged homeowners.

‘Questions about the sustainability of house price growth are being raised as house prices accelerate on growing scarcity and lower sales volumes, especially in the high growth markets such as London.

However, there is a glimmer of hope for buyers as investor demand weakens next year, Hometrack predicts. This will be due to the changes in stamp duty rates for second homes and the tax relief changes for landlords.

Mr Donnell added: ‘Assuming the first interest rate rise is in the second half of 2016 then we expect 7 per cent growth in city level house prices over 2016 with housing transactions broadly flat. This is based on a slowdown in growth across London as affordability pressures and lower investor demand ease the upward pressure on house prices.

‘Earlier and faster rate rises than those assumed by the market would reduce the scale of house price growth as they would further impact investor demand and mortgage affordability.’

The Bank of England is widely expected to raise interest rates in the second half of next year from the historical low of 0.5 per cent as the economy improves.

Brad Bamfield, CEO of Joint Equity says “buying with Joint Equity means your deposit is lower at 5% of house price as a minimum and we use your ability to pay rent as the affordability factor. So if you have paid rent for 12 months or more we will support you up to £100 per month more than that rent.”

This means most people who can afford to rent can afford to buy with Joint Equity.

Article source This Is Money, full article here.

Rents rising faster than house prices – a good time to buy with Joint Equity

House prices will rise by 6 per cent next year, according to the Royal Institution of Chartered Surveyors, but renters will lose out the most to inflation.

Tenants are set to see the cost of renting a home rise faster than their incomes and faster even than house price growth, RICS suggests rents could rise by five per cent a year.

Next year, house prices across the UK are expected to climb by an average of six per cent and will ‘outstrip any commensurate rise in household incomes’, RICS forecast.

Northern Ireland and London could see prices climb by 5 per cent next year, while the South East and West Midlands could see hikes of 7 per cent

The Office for Budget Responsibility had predicted that house prices would rise 5 per cent year-on-year until 2020.

This is because the surveyors expect demand for homes to continue to outstrip supply going into the new year.

Northern Ireland and London could see prices climb by 5 per cent, while the North West, Wales and Yorkshire and Humberside could see a rise of 6 per cent.

In the North East, house price growth is expected to be more modest than the national average next year, with prices rising 3 per cent, RICS said.

Other regions, including Scotland and the East Midlands are predicted to see house price growth of 4 per cent next year.

East Anglia prices are predicted to lead the way with an increase of 8 per cent next year, while the South East and West Midlands could see 7 per cent price hikes RICS said.

These are predictions based on factors such as lack of supply and the impact of government initiatives.

Should house prices continue to rise faster than average incomes, aspiring first-time buyers will find it even tougher to get on to the property ladder in the new year. The problem would be compounded if rental costs continue to rise at an even faster pace as tenants will have to spend a greater proportion of their incomes on housing costs and will have less to put away towards a deposit.

Simon Rubinsohn, RICS’s chief economist, said: ‘Housing has clearly leapt up the Government’s agenda, but despite the raft of initiatives announced over the past year, the lags involved in development mean that prices, and for that matter rents, are likely to rise further over the next 12 months.

‘Lack of stock will continue to be the principal driver of this trend but the likely persistence of cheap money will compound it for the time being.

‘Looking further out, there is some justification for taking a more optimistic view of new build with significant incentives being put in place to deliver starter homes.

‘While this may not on its own stem the upward trend in house prices, it could help to slow the rate of growth to something closer to the probable rise in household incomes.

‘Critically our principal concern with the measures announced by the Government is that they are overly focused on promoting home ownership at the expense of other tenures.

‘Discouraging Buy to Let could see private rents take even more of the strain if institutional investment doesn’t increase significantly, particularly given the likely reduced flows of social rent property going forward.’

Brad Bamfield, CEO of Joint Equity says “buying with Joint Equity means your deposit is lower at 5% of house price as a minimum and we use your ability to pay rent as the affordability factor. So if you have paid rent for 12 months or more we will support you up to £100 per month more than that rent.”

This means most people who can afford to rent can afford to buy with Joint Equity.

46% of First Time Buyers consider Shared Home Ownership

Almost half (46%) of first time buyers are considering turning to shared equity and shared ownership schemes to enable them to buy their first home, according to research from Lloyds Bank.

Of these, one in four (26%) said affordable housing schemes were their only option for getting onto the property ladder and they would not be able to buy a home otherwise.

One in four (24%) said it allowed or would allow them to buy in an area which would otherwise have been unaffordable.

The economic downturn has also had an impact on how people view affordable housing schemes, with one in six (15%) of first time buyers saying they would not have considered the schemes previously, but have changed their mind due to the economic conditions.

Eight in ten (81%) first-time buyers claim to have a basic or good understanding of shared ownership schemes, although this is less for shared equity schemes (64%).

Brad Bamfield CEO of Joint Equity said: “Over the past few years the shared home ownership concept has become more established and understood. However most people have only heard of the Government and Housing Association schemes and developers own schemes or Help to Buy for new houses.

“Government schemes still have a stigma attached and the social engineering aspects that Housing Associations apply put off many people. Of course developers only use shared home ownership to shift the rump of developments they cannot sell in any other way and buyers know that and of course are not impressed.”

What many people don’t know is that there is an alternative privately financed shared home ownership option which delivers quality homes to want-to-be homeowners – with no social agenda.”

Over the last 7 years Joint Equity has become a life style option for our Owner Partners which provides many advantages over other home ownership options.

Find out more here www.jointequity.co.uk

Sources: Lloyds TSB read research here

The word is spreading about Joint equity and Shared Ownership

Good to see the word being spread about the Joint Equity model of shared ownership. Read some of our latest press coverage here:

1) ‘I earned £9k by “spotting” an empty home’: How buyers, sellers, investors and even a spotter can win in the property market

17th October, by Laura Shannon, featured in This Is Money and Financial Mail on Sunday

“Help to Buy, the Government’s flagship home ownership scheme, currently allows people to buy a property with just a 5 per cent deposit. But a new scheme from company Joint Equity is being launched tomorrow to give those who rent privately a leg up on to the property ladder.

It is targeting ‘reluctant renters’, retired people who are renting and divorced or separated tenants.”

2) Company kicks off 50-50 home ownership scheme

9th October, byRyan Bembridge, Mortgage Introducer

http://www.mortgageintroducer.com/mortgages/253932/5/Industry_in_depth/Company_kicks_off_50-50_homeownership_scheme.htm

“Joint Equity Investment LLP said it will cater for reluctant renters, retired renters and divorced & separated renters who are unable to raise a deposit and don’t qualify for local authority or housing association support because they earn too much.”

3) Will Joint Equity be the key for first-time buyers or should they hold out for the Help to Buy Isa?

16th November, The Independent

http://www.independent.co.uk/money/will-joint-equity-be-the-key-for-first-time-buyers-or-should-they-hold-out-for-the-help-to-buy-isa-a6734346.html

“Available for homes worth under £250,000, a pilot for Joint Equity has been running over the past five years – and has helped 21 buyers get a home in Bedfordshire, Buckinghamshire and East Anglia.”

4) New home-buying scheme aims to give shared ownership alternative

19th October, by Rozi Jones, Financial Reporter

“Joint Equity is rolling out nationwide a scheme which will allow private renters to purchase a property in a 50/50 partnership with the bondholders through a Joint Equity Investment LLP.”

http://www.financialreporter.co.uk/finance-news/new-home-buying-scheme-aims-to-give-shared-ownership-alt3rnative.html

Read more about the Joint Equity shared ownership offering here. Read more

Key questions about the Joint Equity co-ownership scheme

There are key questions about the Joint Equity co-ownership scheme from buyers and mortgage advisers alike. They give you valuable insight into what some of the shared ownership market participants care about – so here are our answers.

“Key questions here for potential buyers are how much of the profits they receive on sale”

You are a co-owner with us and receive the same proportion as your Share.

50% Share = 50% of the sale profits.

“What interest rate they are paying on their portion of the loan.”

The interest rate you pay is the interest rate your mortgage lender offers. You can shop around and are free to go with any lender who will support Joint Equity co-ownership.

“What happens if and when I want to sell?”

When you want to sell you must offer your Share to us first and we have advice 21 days to say if we will:-

Buy your Share
Sell our Share with you at the same time.
Or do neither and you are free to sell your Share to a new incoming Joint Equity Resident Partner. (it’s like selling a normal house and we assist your estate agent)

“What happens if the property falls in value or falls into negative equity?”

It’s the same as owning 100% of your house. If you are in negative equity and keep paying the mortgage and Non Resident Partner payment there is no impact. If you need to sell your Share for any reason you will get market value.

“We would always advise clients to try and obtain a larger deposit through collecting funds from family who can release equity from their own properties, or guarantor schemes, or even buying with friends. Entering a partnership with a commercial organisation will always come with risks that are usually not as flexible to negotiate with as friends/family or other less commercially minded sources of funding for your first home.”

This is the usual advice given to buyers however our Resident Partners often don’t have parents or family in a position to help.

The other thing our Resident Partners tell us that, contrary to this view, it is better to go with Joint Equity as we have clear rules in the Partners Contract and our Resident Partners know what they can expect from us.

Do let us know if you have any other questions that we don’t yet answer in our FAQ.

As Buy-to-Let loses tax relief, property investment alternatives become more desirable

I have long been a critic of buy-to-let, specifically about the unlevel playing field between landlords and homeowners.

Buy-to-let has always been popular but that is now changing

The chief concern has traditionally been the favourable tax treatment for buy-to-let. This has allowed landlords to offset many costs against rental income to lower their tax bills – the big one being mortgage interest which was removed from homeowners years ago.

Now I understand that when buy-to-let was conceived it was considered as a business and the principle behind that has always been that tax should only be charged on profits. So in the business of buy-to-let, mortgage interest and other allowable expenses are costs and therefore deducted before the profit is calculated.

That situation is changing as result of many landlords buying property not as a business but just as another property to maximise their capital gains.

“Ha ha” I hear you shout, that is a business – an investment business; but Chancellor George Osborne does not see it that way and has decided full-on mortgage interest income tax relief on buy-to-let was unfair or possibly a prime target for getting some extra tax in – and took the axe to it in his summer Budget.

He has also changed some allowable expenses such as the blanket 10% allowance for furnished properties which is also going.

Buy-to-let less attractive due to tax changes

But the big one is restricting buy-to-let mortgage tax relief to a maximum of 20%. This will diminish the attraction of buy-to-let. Yet Britain’s small army of cash-rich minor property investors still appear to be piling in. Especially as you can now take your pension out and do with it what you will.

This is a classic example of intervention by Government, for the right reasons, having often unforeseen consequences which requires another intervention:

Release the shackles on pensions and we go and buy more property to rent out.
By more potential landlords competing for property, owner occupiers are further priced out of the market.
This means the would be home owner is driven into the very houses they are priced out of and the new landlords have just bought.
This increases the UK rental trap that over 1 million people are currently in.

Buy-to-let mortgages easier to get

One of the temptations to become a landlord is the current very cheap buy-to-let mortgages. A new deal arrived this week, a two-year fix at just 1.84% from Accord. And this highlighted another place where the playing field is not quite level.

Most buy-to-let mortgages are interest-only, whereas most owner-occupiers must take out a repayment mortgage.

On an interest-only basis, a £150,000 mortgage at 1.84% would have monthly payments of £230.
On a repayment basis, monthly payments would be £628

Furthermore, across the mortgage industry, with MMR and affordability the same borrower is likely to find a buy-to-let application far less onerous than a residential one.

Budding landlords should be warned though – change is in the air.

They may find the rules are much tighter when it comes to remortgaging at the end of that two-year fix with the up coming EU changes to buy-to-let mortgage approval rules. But more of that in a future blog.

Of course the easy route into UK property for both home occupiers and investors has now become through Joint Equity and its associated Investment Bonds.

See www.jointequity.co.uk if you want to own your own home,

and www.jeips.uk if you want all the information about joining the ethical UK property investment revolution.

Brad Bamfield

4.4 million households rent in the private sector

English Housing Survey Headline Report 2013-14 was published in February 2015:

What it had to say about the increase in the Private Rented Sector (PRS) and about the 25 to 34 age range is significant.

The private rented sector remained larger than the social rented sector.

In 2013-14, 19% (4.4 million) of households were renting privately, up from 18% in 2012-13 and 11% in 2003.

The proportion of households renting social housing remained steady at 17% (3.9 million).

Young households aged 25-34 were more likely to be renting privately than buying their own home.

In 2013-14 almost half (48%) of all households aged 25-34 rented privately, up from 45% in 2012-13.The proportion in this age group living in the private rented sector has more than doubled from 21% in 2003-04. Over the same 10 years, owner occupation in this age group dropped from 59% to 36%.

Average weekly private rents in London were consistently higher than outside of London from 2008-09 to 2013-14.

In 2013-14, average weekly private rents were £281 in London and £145 outside of London. There was a smaller difference between average weekly social rents in London (£125) and outside London (£87).

The number of non-decent homes in England continued to decline. In 2013, 4.8 million dwellings (21%) failed to meet the decent homes standard, a reduction of 2.9 million homes since 2006, when around a third (35%) of homes failed to meet the decent home standard.

Damp problems were more likely to be found in private rented dwellings than social rented or owner occupied dwellings. In 2013 about a million (999,000) homes (4%) had problems with damp, compared with 2.6 million (13%) homes in 1996. Some 8% of private rented dwellings had some type of damp problem, compared with 5% of social rented dwellings, and 3% of owner occupied dwellings, although private rented dwellings tended to be older properties more prone to damp problems.

In 2013-14, the private rented sector accounted for 4.4 million or 19% of households. Throughout the 1980s and 1990s, the proportion of private sector households stayed steady at around 10%. However, the sector has undergone sharp growth since then and has doubled in size since 2002, driven by a number of factors.

In the late 1990s rent controls were removed, and assured shorthold tenancies became the standard, giving greater flexibility in the length of tenancies. Lenders also introduced the buy-to-let mortgage at around the same time.

In London, the proportion of households in the private rented sector increased from 14% to 30% between 2003-04 and 2013-14, Figure 1.2. Over the same period, the proportion of households in London that were owner occupied, but buying with a mortgage declined from 39% to 27%. In London, the private rented sector became as large as the mortgagor sector in 2013-14.

The whole document can be read HERE

No way out of renting for four in ten tenants

Home ownership is out of reach for 42% of tenants, who say they cannot afford to save for a deposit at all, and other want-to-be homeowners are unable to save enough.

The average amount saved by the 35% of tenants who do save for a deposit is £12,125 – about 7.3% of today’s average house price of around £165,000. That’s significantly less than the 10 to 20% which is typically required (approx. £16,000 to £30,000).

What many people aren’t aware of are the alternative co-ownership options available to them. With Joint Equity, for example, the minimum deposit required is 5% of the home value which for today’s average house is £8,250.

Surprising still is that nearly one-third of tenants are spending more than half their take-home pay on rent, and 35% of those managing to save a deposit are having to dip into it, either regularly or to pay for holidays. Among the under-30s, 60% have already used their home savings pot for other things.

These statistics are all from the property-sharing website SpareRoom, and another interesting and perhaps unexpected statistic shows that the large majority (79%) of those polled described themselves as employed professionals.

Matt Hutchinson, director of SpareRoom.co.uk, said: “A significant proportion of the people we polled expect to live in rented accommodation for at least five years, and many believe it will be much longer than that.

“The facts speak for themselves. Soaring living costs mean it’s a struggle for many households just to keep their heads above water each month, let alone have enough spare cash to put aside towards a deposit. The survey shows that even those who are squirreling away funds have not managed to save anywhere near enough to buy the property they want.”

Brad Bamfield CEO of Joint Equity said, “These stats continue to shock us which is why we’re determined to help educate people about alternative home ownership options. For instance, our Resident Partners can now live in their own home in co-ownership with us on a 50/50 basis. In nearly all cases if you can afford to rent you can afford to buy with Joint Equity.”

“We aim to help over 25,000 people leave the rented sector for their own home every year and our vision is that no one who does not want to rent should be forced to stay in it longer than really necessary”

For more information visit www.jointequity.co.uk

Our thanks to http://www.spareroom.co.uk/

Retired and still renting – a concerning trend

Joint Equity now helps retired people who are trapped in rental properties buy a home of their own. We have always helped first time buyers and divorced and separated but the demand from older would be buyers who have perhaps been refused mortgages or believe they will never have the security of their own home is overwhelming.

In the 2011 census there were 4.2m households living in private rented accommodation. 50% of the head of household were in the 50 to 75 age group – that is over 12m households. 50% of these people declared themselves as economically inactive. The majority said this was because they were retired. That is a staggering 3m households.

In the 50 to 75 age group just over 25% were renting and – using the same proportion of social to private sectors. This suggests that over 350,000 households are retired and living in the private rented sector.

“At later stages in life, where security and peace of mind is even more of a priority, it’s concerning that such a significant percentage of our retired population is having to endure the uncertainty, and many other issues, that come with renting a property, “ says Brad Bamfield CEO of Joint Equity.

“There are so many unappealing aspects of rented living – the prospect of having to regularly move, the upheaval, the concerns about rising rent prices. A priority must be to educate people more about the alternative home ownership options available to them. There are new ways to escape the rental market, take control of your housing finances and own your own home.”

If any of the following questions strike a chord with you, as it does many of our current Resident Partners over a “certain” age, and you answer yes then you need to read on and see how Joint Equity can help you now because if you can afford to rent you can afford to buy with Joint Equity.

Are you retired and living in rented property?
Do you dislike the insecurity of rented accommodation?
Worried about future rent rises?
Do you have savings that earn you next to nothing?
Do you think you can never live in your own home with all the security that provides?

Joint Equity can help change things for the better.

You own 50% and we own the other 50% in Partnership. So any growth in the property is shared 50/50 between us and when you sell your Share in the property you get your deposit back as well.

And we do this often for less than the cost of renting.

Remember we are not your landlord we are you Co-owning Partner and its absolutely your home with complete security to stay there as long as you want.

Your investment in your home can be passed on to your heirs together with your share of the increase in value, we are not Equity Release taking great chunks of your value. Nor do we interfere in your life while you live in your home however, we are always available 7 days a week if you need advice or help with the home – we are you Partner after all.

Brad Bamfield CEO of Joint Equity said “the retired renting sector is very important to us as security becomes more important the older you become. We all remember when we were young nothing was frightening and moving every year or so was exciting. “

“This is not the case when you are over 60 when change and upheaval, usually not through your choice but usually imposed by your landlord, is frightening, difficult and deeply upsetting.”

“Joint Equity offers a real alternative to many people in this sector offering peace of mind, security and a real Partnership for the future years.”

Joint Equity offers an alternative for retired people living in rented accommodation and a viable, secure way of owning your own home. For more information find out about how to become a Resident Partner www.jointequity.co.uk and check out our video page https://www.jointequity.co.uk/videos/ for a real life Resident Partner and her experience.

Sources: Housing Census headlines here

Joint Equity Co-Ownership – an alternative way

Joint Equity offers a new way to buy a home and new opportunities for investors.

There are over 1 million people trapped in the rental market with all the wasted money and insecurity that entails when they would rather live in their own home. There are also many investors falling out of love with Buy to Let who still want to invest in the UK residential property market. Now we have a solution that brings benefits to both these parties.

For 35 years I have been a builder and developer selling well designed flats and houses that I am very proud of, and my buyers are happy to live in.

But I have always been aware that for every home I built 10+ people were disappointed being unable to get a mortgage or not being able to raise a high enough deposit. This meant they remained in rented accommodation.

In my time I have lived in rented houses and I hated both the insecurity of a Short Hold Tenancy and the restrictions and interference of the landlord and agent. And if I hated it, so do many others.

I really do not want anyone who does not want to to have to live in the rented sector so my vision was to devise a way to help those who needed help to get a home of their own.

Big ask? You are right but I was convinced there was a way to help people move out of rented into home ownership.

In 2006 I devised, invented, designed (call it what you will) a new structure that combines traditional approaches to buying and investing in homes in a new way – Joint Equity Co-Ownership.

As my personal targets have always been the “shoot for the moon” types, I have set the goals for Joint Equity as

To help 25,000 people every year buy their own home and
To provide investors with higher returns and less risk than Buy to Let.

Now with Joint Equity Bonds we have the means to attract sufficient investors to make this happen. So now my goals are within our grasp.

We can easily see what our Resident Partners get from Joint Equity.

Security,
A home of their own,
No landlord or letting agent
A knowledgeable Partner who is on your side
A 50% share of the growth in house prices.

But what do Joint Equity Bond investors get?

Their money back at the end of the Bond.
Secure investment paying a good rate of return which increases the longer they hold the investment. I call this an escalating rate of return and it seems innovative.
A terminal bonus that is linked to the increase in property prices over the life of the Bond.
No hassles associated with being a landlord or having agents always asking for more money. No voids, damage, late payments, problem tenants, increasing legislation, changing tax regimes. (I could go on but there really is none of the problems with the traditional Buy to Let process).

Investors also get the big win with Joint Equity – the feel good factor, the personal satisfaction that comes from knowing that they are helping people who without their investment could never have the security of living in their own home.

So is my vision to help 25,000 people a year move into their own homes and to deliver good returns to investors achievable? Absolutely.

I am a hard headed developer but I also know there are 1,000’s of who really do want to get involved and help while making good returns on their money.

It’s a market solution for a social need – the perfect definition for ethical investment.

Brad Bamfield

CEO & Founder Joint Equity

More information www.jointequity.co.uk