Each extra bedroom in a first time buyer home in London can add almost £19,000 to the cost of a deposit, according to a recent report by property portal Share to Buy.
The report reveals that without the assistance of home ownership schemes such as Shared Ownership purchasing a three-bedroom home in the capital, instead of a two-bedroom property, pushes the average FTB deposit from £93,623 to £112,555. The difference of £18,932 amounts to more than half a Londoner’s average gross income (£32,306). Similarly, upgrading from a one-bed to a two-bed London property adds £16,216 to a FTB deposit.
Besides the financial impact, the report also highlights the added time cost to FTBs who wish to scale the property ladder without Shared Ownership. It takes, on average, 2.2 extra years for a dual earner couple to save for a deposit on a two-bed home compared to that of a one-bed. Moreover, opting for a three-bed property adds a further 2.5 years to their savings time.
Under Shared Ownership, however, smaller deposit sizes mean the cost difference between purchasing a smaller and larger home is greatly reduced. Shared Ownership buyers in London can put down a minimum of £7,819.48 for a two-bedroom home and £8,390.6 for a three-bedroom home, meaning that upgrading to a larger property adds £571.12 to the deposit – a fraction of what it would cost without Shared Ownership. Equally, it can cost a FTB as little as £1,483.51 in extra savings to upscale to a two-bed home from a one-bed, with the latter requiring an average deposit of just £6,335.97 through Shared Ownership.
Shared Ownership offers buyers the opportunity to purchase a percentage share of a property (between 25% and 75% of the home’s full market value) and pay a subsidised rent on the remaining share. Buyers can choose to purchase additional shares as and when they can afford to – also known as ‘staircasing’ – allowing them, in most cases, to ultimately buy their home outright.
Nick Lieb, Head of Operations for Share to Buy, the UK’s leading portal for Shared Ownership homes, comments: “Deposits are among the biggest stumbling blocks for buyers trying to get on the property ladder today. Because of the massive gulf in deposit sizes between one, two- and three- bedroom properties, many buyers are left with an unacceptable choice – postpone jumping on the ladder or settle for a smaller home than they may want or need. By allowing buyers to purchase a share in their home, rather than buying outright, Shared Ownership lightens the burden of a deposit and makes it easier for buyers to snap up the right property for them.”