Shared-ownership housing - good or a bad idea?

Right. However, you're forgetting leverage and assuming that the building is owned free and clear. Here's how I like to look at it:

If I buy a property for $200k with 20% down I pay $40k and the remainder is leveraged money (bank loan).

Let's assume that my rental income just about covers the cost of furnishing that $160k loan and other obligations as a Landlord (ie there's no positive cash flow) Let's further assume the property increases in value at 10% a year (not exactly an off-the-wall assumption in the UK). After 1 year the property will be worth $220k and my equity will have increased from $40k to $60k (ignoring amortization) So, the return on my investment of $40k is a further $20k after just one year. That's a 50% return on initial investment.

The fact that I havn't make any yield at all (by the traditional defenition) is irrelevent.

That's an interesting way to look at it - more of a return on initial equity perspective, but from an investment perspective, I wouldn't use that approach - i prefer Return on Invested Capital contrasted with the cost of capital, and most investors will tend to use this. You always need to consider what that market value of an investment is at that moment in time, not what you paid for it. You then need to contrast the return you're receiving on that lump of capital against other returns you could make using that money, if you sold the property - i.e. look at the return you could get on savings (5%), stocks (UK average yield around 3.5% or so is it?), premium bonds, etc, etc. The historic value of the investment is meaningless - you need to focus on what the capital is worth now, what return you're getting on the current value, and what return you could get on other investments. I accept your point that historically mortgage debt has been cheaper than non-secured debt, but the spreads are closing - clearly your cost of finance between asset classes needs to be considered when you are switching investments.

Good for you, but of course you've got to invest on the basis of where you think returns are going to be in the future, not what they've done in the past. I don't know that property market, but I do know the London market, and I definitely would be short property, and split equally savings and stocks. Money in the London property market has been broadly dead for around 18 months now - I sold in Jan 03 and I don't regret that decision one bit.

It's a false statement to make that property will always beat stocks and savings - its cyclical like any investment and can go up as well as down. too many people subscribe to the view "well, they're not making land any more so it has to keep going up in value". people who bought property in the late 80s know all too well how easy it is to lose money on property - and that i think is the nub of the problem in the UK and why rental yields (in the traditional sense) are now so low - every man and his wife has thought that property is the way to make their fortune, that its a piece of cake, it will be their income and pension combined, so they've all gone out shopping for flats and are now finding they can't fill them at rates that in some cases will even cover their increasing interest payments. so they are selling them again and moving the money back into other investments.

Anyway - what do you reckon about the gov't buying into the UK housing stock - a good idea or a bad idea?