Friends Make Mortgages Affordable

Sept. 29, 2006— -- After 10 years of renting apartments in London, paying tens of thousands of dollars with no financial return, Theo Michaels decided it was time to invest in property. But like many people hoping to buy a home, he wasn't sure he could afford it.

England is one of the most expensive housing markets in the world. According to the British Land Registry, an average property costs £199,000 (about $370,000), almost 10 times the median national income. Michaels did not have enough money to buy a place on his own.

He started to look for someone who would share a place with him, but no one he knew had enough money to invest.

"None of my friends were in a position to buy with me," said Michaels.

After a couple of months of asking around, he finally hit pay dirt. According to Michaels, he had drinks with some potential co-investors to discuss the kind of property they wanted what they could afford to spend. Michaels and two others in the group ended up buying a three-bedroom apartment in North London together.

He was so satisfied with his co-buying experience that he bought a vacation house with six other friends in Bansko, a ski resort in Bulgaria.

Now Michaels has started a Web site called Co-buy.co.uk to help people who want to own property but need the help of others. He founded the site four months ago, and he said that so far it has 500 registered users and received 60,000 hits in September. He has since launched versions of Co-buywithme.com in Canada, Australia and New Zealand.

Like Michaels, more and more first-time U.K. buyers invest with friends to shoulder the financial burdern of owning property. According to HSBC, demand for shared mortgages in the United Kingdom rose by 50 percent this year.

For now, shared mortgages are a "niche product," but they have a lot of potential, according James Cartlidge, a mortgage manager with Sharetobuy.com, which offers financial counseling and services for people who want to buy shared homes.

"If people could buy on their own," said Cartlidge, "they would."

In the United States, major banks such as Citibank, allow several customers to borrow for a single property.

But buying a house with other friends is "not very common" this side of the Atlantic, said Walter Molony, spokesman for the National Association of Realtors, the main U.S. association for real estate companies.

Here, people who co-buy usually do so only for investment purposes and do not actually live in the properties.

Molony said that in the United States, immigrant families who cannot afford a house on their own are more likely to co-buy than friends who club together.