So I have been going back and forth on this for a while and figured I would just post it here and see what people think. I own a 40% share of a studio flat in south London, bought in 2022 when rates were still lowish. The rent on the remaining 60% is about £480 a month on top of my mortgage which is around £340. Service charge is £1,800 a year. The housing association valued the place at £210,000 last year so staircasing to 100% would mean buying the other 60% for roughly £126,000, which with my existing mortgage balance of about £52,000 means I would need a mortgage of maybe £175,000 ish to own it outright. The problem is it is a studio. It is fine for now but I am 32 and I do not really want to be in a studio forever, and I worry that studios are harder to sell than one beds when the time comes. On the other hand I have been looking at one beds within commuting distance and anything halfway decent is £250,000 plus, which means saving a bigger deposit and probably paying more per month even with rates coming down a bit.
I have about £11,000 in savings which is not exactly setting the world on fire. My salary is £38,000. I keep a spreadsheet of everything I spend which is either very sensible or very sad depending on your outlook. The numbers for staircasing look doable on paper but I am not sure if I would just be locking myself into a property that does not really work long term. Has anyone staircased and then sold fairly quickly after, and was it worth it or did you just end up paying fees twice for nothing? Thoughts?
I cannot speak to shared ownership specifically, but I would flag something from my own leasehold experience that might be relevant. When you staircase to 100%, you still have a leasehold interest in most cases, which means you are still dealing with service charges, potential major works demands, and the freeholder relationship. None of that goes away just because you own the full share.
The other thing worth considering is resale. Shared ownership properties can be harder to sell than you might expect because many lenders will not touch them, or impose conditions that narrow your buyer pool. If your ultimate plan is to move to a one bed within a couple of years anyway, sinking more money into the studio only to face those resale headwinds seems counterproductive.
I would want to know what the housing association’s valuation process looks like for staircasing and whether their surveyor tends to come in high. That can eat into the arithmetic quite quickly.
@Clara_Obscura that is a fair point about resale and honestly the bit I keep going back and forth on. The housing association uses an independent RICS surveyor for the valuation and from what I have read online they do tend to come in at or above what you would expect, which obviously makes the sums worse. I think I am leaning towards just selling and buying outright but the deposit gap is the killer. Need to sit down and actually do the numbers properly over new year rather than just turning it over in my head.
The RICS valuation being non-negotiable is the part that would concern me most. You are entirely at the mercy of whatever comparable evidence the surveyor selects, and in south London there will be plenty of recent sales to choose from. The Halifax data out last week showed a 0.6% monthly fall in December, the biggest drop since August 2023, so the direction of travel might actually help you if you wait a few months. Then again, valuations tend to lag the headline indices.
The other thing I would flag is that the surveyor is instructed by the housing association, not by you. They are supposed to be independent, but in practice the HA is a repeat client and you are not. I have no evidence that this skews anything, but it is worth being aware of the dynamic.
Have you asked the housing association whether a valuation done now would be valid for, say, three months? If so, you could get it done, see the number, and then decide whether to proceed without the pressure of committing upfront.
I would be very cautious about staircasing right now, particularly in south London where the gap between what a surveyor puts on paper and what a studio actually sells for can be alarming. I sold my BTL flat earlier this year and the one thing I learned is that the market for small flats is genuinely thinner than people assume, especially when you are competing against new build developers offering incentives. If you staircase to 100% and then try to sell, you have paid full whack for something that might sit on the market for months. Whereas if you sell the 40% share now, even at whatever the housing association process spits out, you have cash in hand and you can start looking for a one bed without the leasehold overhead. The monthly costs on shared ownership always feel manageable until you add up the rent, service charge, and mortgage together and realise you could be renting somewhere nicer for less. I know that sounds defeatist but sometimes the clean break is the right one.
Thanks @Frankie91, that basically confirms the nagging feeling I have had for weeks. The Halifax data out today showing a 0.6% monthly fall does not exactly fill me with confidence about getting a favourable valuation either. If the surveyor catches the market on a down month I could end up paying over the odds for a share of a studio that might be worth less by the time I actually want to move on. I think the answer is probably to sell the studio, take whatever I get, and look at a small one bed further out. Somewhere on the Overground maybe. The shared ownership structure just feels like it is designed to keep you trapped, every step costs money and the housing association always gets their cut. Going to spend January properly looking at what one beds are going for in zones 3 to 5 and see if the numbers work. Thoughts on whether it is better to sell first or get an AIP and try to line things up simultaneously?
I have been thinking about this over the break and I keep coming back to the same conclusion. The numbers do not favour staircasing right now, particularly for a studio in south London.
The Nationwide data out this week showed prices falling 0.4% in December nationally, and studios in London have been underperforming the wider market for some time. You would be paying a valuation premium set by a surveyor using comparables that may already be stale by the time you complete. If the market drifts sideways or down over the next twelve months you could easily end up having staircased at the top.
From my own experience with leasehold, there is also the ongoing cost question. Even at 100% ownership you are still paying service charges and ground rent unless you enfranchise, and the housing association as freeholder is not going to be any more responsive than a private one. I would seriously look at selling the 40% share and starting fresh with a small one bed outside zone 2, even if it means compromising on location.
So I rang the housing association on Friday just to check the process if I wanted to sell rather than staircase. Turns out there is a nomination period where they get to find a buyer first, which can take up to eight weeks, and only if nobody wants it does it go on the open market. Which is fine I suppose but it adds time I had not factored in. The woman on the phone was quite pushy about staircasing being the “better option for building equity” which felt a bit like being sold something. I think @Clara_Obscura and @Frankie91 are probably right that the numbers just do not stack up for staircasing a studio in this market. The plan now is to get a rough idea of what the 40% share would actually sell for and then work out whether that plus my savings gets me anywhere near a one bed deposit. January is probably not the month to be listing a shared ownership studio but then again when is.
Right so I spoke to a mortgage broker on Monday, one of the free ones that the housing association recommended, and the upshot is that staircasing is dead for now. He ran the numbers based on a valuation of around £210k for the full share and even with rates coming down to the low fours the monthly payments would be brutal on my salary. He also pointed out that if I staircase to 100% I lose the shared ownership protections and become a normal leaseholder with a short lease and all the costs that come with extending it, which is basically what Clara said a few posts back. So I am going to sit tight, keep overpaying my rent share slightly, and try to build up more savings over the next twelve months. If the market dips further or rates come down another notch by next winter I will look at selling and buying a one bed somewhere cheaper, maybe zone 4 or further out. For now the studio is fine, it is just small. Meal prep Sunday is back on and I have discovered that batch cooking chilli in a slow cooker is the single best financial decision I have made this year. Thoughts welcome if anyone has been through a similar holding pattern.
Just a quick update on this. I have basically parked the whole staircasing thing for the foreseeable. The broker confirmed what I already suspected, the numbers do not work at my income and with rates where they are it would just be swapping one problem for another. Going to focus on building up the savings pot for the rest of this year and revisit in the autumn. If rates come down a bit more by then maybe the picture changes but I am not holding my breath.