I guess most people who read this blog are old enough to own their own house. But what if you were one of those twenty or thirty somethings who have done everything right- and still could not buy your property.
The recent white paper on housing was long on intent, but short on good ideas.
So here’s a good idea courtesy of my friends Ray and Nigel of Unmortgage.
What if, instead of renting a house you could never buy, you lived in a house were busy buying.
What if, instead of worrying whether the blu-tak you put on the wall would lose you your deposit, you were free to decorate the place how you liked.
What if, instead of downsizing to somewhere you didn’t want to live, you started buying the house you and your partner and the sprogs could be really proud of?
Here’s how Ray and Nigel are dreaming of making this happen.
They’re out there talking to pension funds and insurance companies and asset managers who want to invest in residential properties with young striving tenants.
And they’re finding that pension funds and insurance companies like the idea of helping young strivers to a point where those strivers can get a mortgage and the properties they’re renting. And in the meantime, they like the 5% rental yield that the strivers are paying them as they build an equity stake in the property.
They’re finding that the young strivers are dreaming of increasing their equity stake in the property. not by borrowing but by saving money directly into bricks and mortar. Buying into the property brick by brick, month by month till they have got to an equity holding sufficient to buy the pension fund or insurance company out.
A bit of a dream, a bit of reality
The dream is becoming reality, Unmortgage are currently squatting in the offices of Cushman and Wakefield, making plans. They’re collecting data on all the postcodes that these young strivers want to live in and understanding what the profiles of the strivers who most need their help.
Last September, the Times ran a story on Unmortgage. Within days they’d had 4500 hits on their website and 450 strivers applied to do a consumer trial. The average strivers were couples earning £80,000 between them with £40,000 saved. Not having access to the bank of Mum and Dad, they were locked out of the housing market and deeply unhappy with their residential status.
They started sending Ray, Nigel and their friends details of the properties they wanted to buy. They didn’t want to buy studio flats, they wanted to buy properties that suited their lifestyles and those properties cost a lot of money, often £400,000 or more.
The dream of buying these properties remains unrealised. Ray and Nigel and their friends struggle to get the institutional investors to do more than applaud their efforts. This is not enough, they need a Legal & General or a Hermes or an Aviva to press the red button and swing the chair round!
How it works
Go to https://unmortgage.com/how and find out how it works. It’s pretty simple, you find a property, Unmortgage find the investor and you love your home.
Valuations are arrived at, through the databases of properties Unmortgage are building. These guys are data specialists. Transactional costs can be managed to best advantage, initial investment from each striver can be from as low as 5% of the property value.
Increasing your stake in the property is as simple as overpaying your rent!
So push the red button and swing that chair!
Ray and Nigel need a few consultants to do more than smile, consultants to get Pension Trustees to organise money their way! They need fund managers to invest in the limited partnerships and they need insurers to seed the funds with their own capital.
We need the Government to do more than ask where the innovation is. We need them to recognise this is the innovation! We need them to look carefully at how they can help make these partnerships between investors and strivers work. That means looking at Stamp Duty and taking a view.
Then Ray and Nigel and their friends can start turning dreams into reality.
I know that some readers will be thinking that I really should be writing about the homeless, or those just getting by. These people do need help but it’s not this help.
If you’re of my kind of age, you probably own the bank of Mum and Dad and you may well have kids who are striving and failing. You may well be the kind of person who is either advising, or a fiduciary or even an executive of an asset manager or an insurer.
In short, you may be in a position to help. If so, contact
Ray at ray@unmortgage.com
No one wants to invest at the top, either in money or value terms.
Houses are terrible value for money. Have you seen what goes into a modern new build?
The prices will drop if debt gets expensive again.
If debt doesn’t get expensive again then by definition the economy will be awash with cheap money, which means devalued currency, which means high inflation.
Going all in on the most expensive thing you’ll ever buy at this critical point would be a bad idea.
They’re going to get easier to afford one way or the other over the next 20 years.
Unmortgage specifically is focused on mid-market properties in areas that have demonstrated large amounts of historic demand, this means that new builds would not be something we would buy on a value for money basis.
Our focus is on offering an inflation linked income product for institutional investors so they can match their long-dated liabilities.
For potential homeowners, we are helping those who are stuck renting, and for whom a mortgage is currently out of reach. In either of those scenarios you mentioned they would still be unable to buy a home with a traditional mortgage or indeed current shared ownership offerings.
One last point to make is that the riskiest part of the mortgage market is first time buyers with high LTV loans. Unmortgage decouples these people from the risks of leverage and interest movements, creating a more stable housing market in the long run.
If you have any other questions please reach out on Josef@unmortgage.com
How is this different from shared ownership or shared equity?
The key difference Gareth is the choice available for potential homeowners. The current government stance is trying to drive consumers to New Build properties, which are limited in number, quality and location. The type of home you want to live in isn’t available in current shared ownership. You can see a little chart I which demonstrates the lack of choice available: http://i.imgur.com/txJfWwI.png
If you have any more thoughts you can email me at Josef@unmortgage.com
Alternatively you can ask the questions on this blog!!! We would be keen to hear more!