Shared ownership is a way to buy a home where you only own a portion of it, while paying rent on the remaining share. It’s becoming a more popular option in the Philippines, especially for those who dream of owning a home but can’t afford a traditional mortgage.
What is Shared Ownership Anyway?
Imagine a cake. Instead of buying the whole cake yourself, you and a friend decide to split it. You buy half, they buy half. Shared ownership is similar to that, but with a house or condo. You buy a share of the property (usually a percentage), and someone else (like a housing association or a developer) owns the rest. You then pay rent on the share you don’t own. This makes getting on the property ladder much easier because you only need a mortgage for the portion you are buying.
Why is Shared Ownership Gaining Popularity in the Philippines?
The Philippines faces a real challenge with affordable housing. Many Filipinos, especially young professionals and families, struggle to save enough for a large down payment on a home. The cost of land and construction materials continues to increase, making properties even more expensive. Shared ownership offers a solution by significantly reducing the initial financial burden. Instead of needing a 20% down payment on a PHP 5 million condo, you might only need a 5% down payment on a PHP 2.5 million share. This makes homeownership a realistic goal for more people. The rise in interest in shared ownership also mirrors global trends, where similar schemes are already well-established in countries like the UK and the US.
The Benefits of Shared Ownership in the Philippines
There are several advantages to shared ownership, making it an appealing option for many Filipinos:
Lower Initial Costs: This is the biggest benefit. Because you’re only buying a share, your down payment and mortgage are smaller, making it easier to get started.
Step onto the Property Ladder: For many, shared ownership is a stepping stone to full ownership. It’s a way to get into the housing market and start building equity.
Affordable Monthly Payments: While you’ll be paying both a mortgage and rent, the combined amount is often more affordable than a full mortgage alone, especially in high-cost areas.
Opportunity to Increase Ownership: Many shared ownership schemes allow you to gradually increase your share of the property over time, a process often called “staircasing.” This means you can eventually own the property outright.
Freedom to Customize: Once you have bought into a property, you can typically carry out cosmetic improvements, just as if you owned the property outright.
Potential Drawbacks and Things to Consider
While shared ownership has many benefits, it’s essential to be aware of the potential downsides:
Rent Payments: You’ll still be paying rent on the portion of the property you don’t own. This rental portion could increase overtime.
Service Charges: Aside from rent, there might be service charges for the maintenance of the building or community. Ask about these during the application process. It’s imperative to ask for a breakdown of all service charge/monthly fees during application or inquiry.
Limited Control: While you can usually make changes to the interior of your home, major alterations might require permission from the housing association or developer. It is very important to double check on this.
Selling Limitations: Selling a shared ownership property can be more complex than selling a fully owned property. The housing association or developer usually has the first right to buy back your share.
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Mortgage Availability: Not all banks readily offer mortgages for shared ownership schemes. You’ll need to shop around and find a lender that specializes in this type of financing.
Who is Shared Ownership Right For?
Shared ownership is a good option for:
First-time buyers: Especially those struggling to save for a large down payment.
Young professionals: Individuals who have stable income but haven’t accumulated significant savings.
Families: Those who need a larger home but can’t afford a traditional mortgage.
Those living in high-cost areas: Where property prices are significantly higher than their income.
However, it’s not suitable for everyone. If you anticipate a significant increase in your income soon and believe you can afford a traditional mortgage in the near future, or if you prefer complete control over your property, shared ownership might not be the best option.
How does Shared Ownership Work in the Philippines?
While still relatively new in the Philippines, the basic principles of shared ownership are the same as in other countries:
- Find a Shared Ownership Scheme: Look for developers or housing associations that offer shared ownership properties. Start with online searches and inquiries.
- Assess Your Affordability: Determine how much you can realistically afford for a down payment, mortgage, and rent.
- Apply for a Mortgage: Find a bank that offers mortgages for shared ownership and get pre-approved.
- Choose Your Property: Select a property that meets your needs and budget.
- Purchase Your Share: Agree on the percentage of the property you want to buy.
- Move In and Pay Mortgage and Rent: Once the purchase is complete, you’ll start paying your mortgage on your share and rent on the remaining portion.
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It is very important to consult with financial advisors to assess true affordability during application.
Shared Ownership: A Real-Life Example
Let’s say Sarah, a young professional in Manila, dreams of owning her own condo. She earns a decent salary but has student loan debts, which make it hard for her to save for a 20% down payment on a PHP 6 million condo. Through a shared ownership scheme, she is able to purchase a 50% share of the property for PHP 3 million. She secures a mortgage for this amount and pays rent on the remaining 50%. While she pays rent, she is able to build equity and eventually purchase the remaining portion of the property through staircasing. This example illustrates how shared ownership can make homeownership accessible to Filipinos who might otherwise be priced out of the market.
Staircasing: Increasing Your Ownership Share
“Staircasing” is the process of buying larger shares of your home from the Housing association or developer, with a view to owning your home outright. One of the key advantages of shared ownership is the option to increase your ownership share over time, a procedure commonly referred to as “staircasing.” This allows you to gradually increase your equity in the property and reduce the amount of rent you pay. It also helps the property owner to afford the costs over tim instead of spending huge capital. The process typically involves revaluing the property and buying additional shares at the current market value. The frequency and minimum percentage for staircasing vary depending on the specific shared ownership scheme. It’s essential to understand the terms and conditions before committing to the purchase. This is an example of how a homeowner can become the sole propery owner, especially to those who are starting their families.
Financing Options for Shared Ownership in the Philippines
Securing a mortgage is a crucial step in the shared ownership process. While not all banks in the Philippines currently offer specific shared ownership mortgages, some are becoming more open to the concept. It’s important to research and compare different lenders to find the best rates and terms. Look for banks that have experience with shared ownership schemes and understand the unique aspects of this type of financing. Don’t be afraid to ask questions and get clarification on any fees or charges involved. Aside from banks, research on other financing options being offered by private investors.
Finding Shared Ownership Opportunities
Finding shared ownership opportunities in the Philippines may require some research and networking. Start by contacting developers and housing associations that are known for their affordable housing projects. Check online property portals and filter your search to include shared ownership options (if available). Attending property expos can also be a good way to connect with developers and learn about new shared ownership schemes. Word-of-mouth and referrals from friends or family can also lead to potential opportunities. Make sure to attend property exposures to acquire knowledge on shared ownership schemes.
The Importance of Due Diligence
Before committing to a shared ownership property, it’s crucial to conduct thorough due diligence. This includes reviewing the contract carefully, understanding the terms and conditions, and seeking legal advice. Get a qualified property appraiser to assess the value of the property. Investigate the developer or housing association offering the shared ownership scheme to ensure they have a good reputation. Don’t hesitate to ask questions and get clarification on anything you don’t understand. Consulting with a lawyer will protect you from potential misdealings.
Shared Ownership vs. Renting: Which is Better?
The decision between shared ownership and renting depends on your individual circumstances and goals. Renting offers flexibility and requires less upfront capital, but you don’t build equity. Shared ownership allows you to get on the property ladder and start building equity, but it comes with the responsibility of a mortgage and rent payments. If you are looking for long term investment, shared ownership is recommended. If you value stability and want to own your own home eventually, shared ownership might be a better option than renting. Consider your financial situation, lifestyle, and long-term goals before making a decision.
Shared Ownership and the Future of Housing Affordability in the Philippines
Shared ownership has the potential to play a significant role in addressing the housing affordability crisis in the Philippines. By making homeownership more accessible, it can empower more Filipinos to achieve their dreams of owning a home and building wealth. As awareness of shared ownership grows and more developers and lenders embrace the concept, it could become a mainstream housing option in the Philippines. Support from the government through incentives and regulations can also help to further promote the growth of shared ownership schemes and ensure their sustainability.
Cost Statistics and Examples
To illustrate the cost advantage of shared ownership, consider the following example:
Traditional Ownership:
- Property Price: PHP 5,000,000
- Down Payment (20%): PHP 1,000,000
- Mortgage Amount: PHP 4,000,000
Shared Ownership (50% share):
- Share Price: PHP 2,500,000
- Down Payment (5%): PHP 125,000
- Mortgage Amount: PHP 2,375,000
- Rent on Remaining 50%:
Assuming a 20-year mortgage at 7% interest, the monthly mortgage payment for the traditional ownership would be around PHP 31,000. For the shared ownership, the monthly mortgage payment would be around PHP 18,300, plus the rent of PHP 10,000-15,000, for a total of PHP 28,300-33,300. While the monthly costs are similar, the significantly lower down payment makes shared ownership much more attainable for many Filipinos. According to Statista, as of January 2024, the average monthly salary in the Philippines is around PHP 17,500. This highlights the challenge many Filipinos face in saving for a traditional down payment.
Lifestyle Considerations
Living in a shared ownership property is similar to living in a fully owned property in many ways. You have the same rights and responsibilities as any other homeowner. You can decorate your home to your liking, enjoy the amenities of the building or community, and build relationships with your neighbors. However, it’s important to remember that you don’t own the entire property and that certain restrictions might apply. Some shared ownership schemes may have rules about pets or subletting. Be aware of the rules before moving in and follow those guidelines at all times. It’s also important to build trust with the company or developer that handles the remaining portion of the property to avoid potential issues in the future.
Desire for Homeownership
Despite the challenges of affordability, the desire for homeownership remains strong in the Philippines. Owning a home is seen as a symbol of security, stability, and success. It’s also a way to build wealth and pass something on to future generations. Shared ownership can help fulfill this desire for Filipinos who might otherwise be excluded from the conventional housing market. By providing a more accessible pathway to homeownership, it can empower more Filipinos to achieve their dreams and improve their quality of life. In a country where multi-generational living is common, owning a home also means having a place to accommodate and support extended family members.
Features of Shared Ownership Properties
Shared ownership properties are typically similar in terms of features and amenities to other properties in the same development or area. They can range from apartments and townhouses to single-family homes. Common features include modern kitchens, comfortable living spaces, and access to amenities such as swimming pools, gyms, and parking. The quality of the properties and the level of amenities offered can vary depending on the developer and the price range. Some developers specifically design shared ownership properties with features that cater to the needs of young professionals and families, such as co-working spaces and children’s play areas. Consider the features that are most important to your lifestyle and choose a property that meets your needs.
Experiences of Shared Ownership Homeowners
Hearing from people who have already gone through the shared ownership experience can be valuable in making your own decision. Many shared ownership homeowners report feeling a sense of pride and accomplishment in owning their own home, even if it’s only a share. They appreciate the affordability and the opportunity to gradually increase their ownership share over time. They also value the stability and security that comes with homeownership. When interviewing homeowners, do some research about shared properties in the area to have proper comparisions.
FAQ Section
What happens if I want to sell my share?
The housing association or developer usually has the first right to buy back your share at the current market value. If they don’t want to buy it back, you can sell it on the open market, but the housing association or developer will usually have the final say on who can buy it.
What if I can’t afford the rent and mortgage payments?
It’s important to contact your lender and the housing association as soon as possible to discuss your options. They may be able to offer a payment plan or other forms of assistance. If you continue to struggle, you may have to sell your share.
Can I rent out my shared ownership property?
In most shared ownership schemes, you are not allowed to rent out your property without permission from the housing association or developer. This is because the scheme is designed to help people who want to live in their own home, not to become landlords. This also ensures it is not used with illegal purpose.
What happens if the property value goes down?
If the property value goes down, the value of your share will also decrease. This is a risk that comes with owning any type of property. However, shared ownership can offer some protection against falling property values because you only own a portion of the property.
Are there any government subsidies or incentives for shared ownership in the Philippines?
Currently, there may not be specific government subsidies dedicated solely to shared ownership schemes in the Philippines. However, there are various government programs aimed at affordable housing in general. It’s always best to check with the relevant government housing agencies for the most up-to-date information and eligibility criteria. Check for any new or proposed policies by searching online.
Give Shared Ownership a Real Chance
Shared ownership represents a viable pathway for many Filipinos to achieve the dream of owning their own home. By understanding the benefits, potential drawbacks, and processes involved, you can make an informed decision about whether it’s the right option for you. Don’t let the challenges of traditional homeownership hold you back. Explore the possibilities of shared ownership and take the first step towards building your future.
References List
Note: No active links included in this section as per instructions.
- Statista. (2024). Average monthly salary in the Philippines as of January 2024.
