It can be difficult to assess your options when it comes to stepping onto the property ladder. New affordable housing programmes have been created and backed by the government to help more people access homeownership. Peabody New Homes dives into a cost comparison of buying a home through Shared Ownership vs. private sale.

How affordable is Shared Ownership?

To fully understand how much more affordable Shared Ownership is compared to buying your home through the open market, let’s explore the differences in affordability for two of our developments. They are both located in London and offer 1 and 2 bedrooms both through Shared Ownership and private sale.

Comparing Shared Ownership to private sale at Higgs Yard

When buying at Higgs Yard, homeowners can enjoy a roof terrace

Higgs Yard is our new Brixton collection of homes, located a 2-minute walk away from Loughborough Junction. Residents can enjoy the vibrant local community thriving in Herne Hill and Brixton, whilst being able to get into central London via an 8-minute train. The homes offer private balconies and are pet friendly. Homeowners at Higgs Yard can also enjoy a roof terrace as well as a podium garden.

The total value of a 1-bedroom home at Higgs Yard starts at:

• £450,000 through Shared Ownership
• £460,000 via private sale

Those two numbers if different are relatively close. What makes Shared Ownership much more affordable is that the smallest share that can be purchased equals 25%. This means that with this example, a buyer is looking at purchasing a share that costs £112,500.

Because the remaining 75% isn’t being bought, there is no need to apply for a mortgage on that part. You will only have to get a mortgage for £112,500. The deposit required can be as little as £13,625. For the private sale, the lowest deposit needed with a 95% mortgage would be £23,000. 

Shared Ownership is more affordable than private sale at Higgs Yard as the lowest deposit required to buy through Shared Ownership is almost half the amount of deposit required to buy your home through private sale.

The smallest share that you can buy for a 1-bedroom home at Higgs Yard will cost you £112,500 which makes homeownership more accessible to people on lower incomes. When applying for a mortgage, you will only need to prove you can pay mortgage repayment for this amount, and not for the total value of the property (unlike for private sale).

Comparing Shared Ownership to private sale at Arden

Ardem homeowners can enjoy a beautiful nature view from their balcony or terrace

Arden is our collection of homes in Blackheath, Lewisham. Residents can walk to Greenwich station in 10 minutes and quickly commute into the City. An 11-minute train links Greenwich or Lewisham station to London Bridge to allow locals to get into central smoothly whilst benefitting from a greener neighbourhood. All homes come with a balcony or terrace so that homeowners can enjoy Arden's natural surroundings.

The total value of a 1-bedroom home at Arden starts at:

£417,500 through Shared Ownership
£415,000 via private sale

Prices can be higher for a Shared Ownership home if it has different specifications or exposure than a private sale home in the same development. However, this doesn't equate more affordability.

For this one-bedroom home bought through Shared Ownership, a prospective buyer can purchase as little a share as 25%. This means they only need to secure a mortgage to pay £104,375.

When it comes to deposits, buyers can borrow up to 95% using a 5% deposit. When purchasing the 25% share of this one-bedroom home at Arden, a future homeowner only needs to put forward a deposit of £5,219. For the private sale, a 5% deposit would come to £20,750 which is 4 times more expensive than the Shared Ownership deposit.

Why housing affordability matters

Affordable housing is needed right now for a few main reasons. First, the cost of housing is going up much faster than wages. This means that lots of people, especially those with lower incomes or who work in essential jobs, can't find or afford a decent place to live.

The current economic climate remains challenging. Many people are facing the consequences of inflation without seeing their incomes increase, making it even harder to pay for housing. Without affordable options, more people could end up without a place to live.

Affordable housing isn't just about having a roof over your head. It's also about keeping communities strong. When people can afford their homes, they have money left over for other important things like healthcare and education. Plus, having a stable place to live helps people feel safer and more connected to their community.

One of the best options out there for people wanting to buy but struggling both to save enough money for a house deposit and to afford a large mortgage is Shared Ownership.

How does Shared Ownership work?

Shared Ownership is a government-backed initiative designed to help people onto the property ladder by allowing them to buy a share of their home and pay rent on the remaining. They can purchase as little as 25% of the total value of their home. This means they only need to take out a mortgage for that amount.

There is no obligation to increase the share you own and no time limit to adhere to for buying more shares. Buyers can safely start investing into their own home without risking going into debt.

Shared Ownership proves to be more affordable for homeowners when it comes to both deposit and the amount of mortgage needed to be secured. It is a great way for people on combined incomes of below £90,000 in London, and below £80,000 outside of London, to purchase their own home and pave their way to independence. You can learn more about this alternative way to buy by reading our guide to Shared Ownership.