While thousands struggle to get on the property ladder and embark on home ownership, new models of buying such as ‘staircasing’ are suggesting ways to overcome the housing shortage and high property prices.
Shared ownership is providing thousands of aspiring homeowners with a more affordable path to home ownership, offering lower deposits and greater accessibility. For those aiming to achieve full ownership, the process of ‘staircasing’ to 100% ownership can be both simple and attainable.
Staircasing provides a route to full homeownership by allowing homeowners to increase the share they own as finances allow. There are no fixed timescales, meaning that buyers can increase the share of their home that they own according to their individual financial circumstances. As such, the process can give outright home ownership to many of those who fear that it may be beyond their reach. Staircasing enables buyers to gradually increase the percentage of the home that they own.
Freedom
Sovereign Network Group (SNG) gives the example of Radley Reach in Abingdon, where buyers can purchase a 40% share of a house from £150,000 with a deposit from 5% at £7,500. They pay a subsidised rent on the remaining share to SNG, then have the freedom to purchase additional shares in the property, as and when circumstances allow.
Purchasing additional shares through staircasing delivers a range of benefits. The more of the home that the buyer owns, the less rent they pay, with no rent payable once they reach 100%. In addition, the greater the share the buyer owns, the greater potential they have for capital appreciation if property values rise (hometrack projects a 2% increase over the course of 2024). Buyers who borrow to purchase a larger share of their property may also find that the larger loan opens up lower interest rates and a greater choice of mortgage products to them.
Buyers generally choose to staircase at the time that their mortgages come up for renewal, avoiding re-financing costs. Typically, shared owners will staircase by a minimum of 10% at a time, although this can vary depending on their individual lease conditions. Those who’ve purchased a share of a home under the new Shared Ownership model will also have the option to staircase at 1% per year for 15 years from the date that they purchase the property.
Buyers using the staircasing process usually have flexibility when it comes to how they grow their property ownership. They can purchase additional shares in incremental chunks, or jump from (say) 40% ownership straight to 100%.
Valuation
The process itself is simple. After assessing affordability, the buyer arranges an independent valuation of their property in liaison with a staircasing team. They share the valuation with the housing association, which then confirms what the additional share will cost and how much of the property the buyer will then own. The remainder of the process – instructing solicitors and completing – runs along the same lines as the purchase of the initial share.
David Ward, Resales and Staircasing Manager at SNG, comments: “Staircasing unlocks full homeownership at the buyer’s pace. It means they can take a first step onto the property ladder and then progress at their own pace and circumstance. It provides hope for those who aspire to own their own home, breaking down the otherwise insurmountable barriers to outright ownership that so many buyers face.”
There can be costs involved in purchasing additional shares through staircasing, just as there are when purchasing an initial share of a property (or, indeed, buying one outright). Legal fees, surveys, valuations and the costs of borrowing must all be factored into affordability, and individual lease conditions apply. Stamp Duty may also be payable. The independent valuation is essential for working out the cost of the additional share that the buyer wishes to purchase. The only exception to this with SNG is for buyers who choose to staircase at 1% per year for the first 15 years, in which case a valuation is not required every year.
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