DISRUPTION HITS THE PROPERTY MARKET. WITH HISTORICALLY LOW INTEREST RATES (THANK YOU CORONA VIRUS) SYDNEY’S PROPERTY MARKET IS BOOMING. AND WHILE GETTING ON THE LADDER MAY FEEL DAUNTING FOR FIRST HOME BUYERS, NEW COMPANIES ARE DISRUPTING THINGS FOR THE BETTER, SAYS WMW LAWYERS.
Companies like BrickX have revealed innovative new ways to invest, and created fractional property platforms where ordinary individuals can buy up to 5% of the 10,000 bricks in any given property. In addition to being able to sell your bricks, to earn potential capital returns, owners of bricks can also earn rental income per brick. By disrupting the traditional home acquisition method, this ingenious model provides an opportunity for ordinary Australians to potentially obtain a stake in incredible properties across Sydney and all-around Australia.
FOCUS ON YOUR STRENGTHS When it comes to the power of collaborative asset procurement, the possibilities of entering the property market are certainly not limited to BrickX. Entering the market with a family member or trusty friend may not only strengthen your borrowing position but may also increase your borrowing capacity. By dispersing and dividing the many moving cogs of acquiring property, joint ventures with two or more parties allow those involved to focus on their strengths. For instance, one individual may have a readily available deposit whilst the other may have the ability to service the loan. In such scenarios, there are several financial and legal tools available which may help parties manage their purchase. Loan facilities, for instance, can be compartmentalised so each individual is
responsible for their own personalised principal and interest repayments. Ownership can also be divided into percentages and if you wish to do so, you can pass on your interest to a party who is not the co-owner of the property. Similarly, family pledges allow for a family member to guarantee part of your home loan whilst also being able to choose how much of the loan they are guaranteeing. This option may help individuals satisfy the deposit requirement and may even eliminate the need to pay the Lenders Mortgage Insurance (LMI) altogether. To avoid paying the LMI, purchasers will usually need to have at least a 20% deposit or have part of the deposit guaranteed. There also exists, however, a number of industry and government related exceptions to this rule.
EXPLORE YOUR OPTIONS The First Home Loan Deposit Scheme (FHLDS) and the Family Home Guarantee allows eligible people to purchase a property with as little as 2-5% deposits. Similarly, industry related incentives usually originate as a result of bank policies relating to low-risk borrowers. For instance, solicitors who apply through some banks and employees of banking institutions are only required to pay a 10% deposit without having to incur the hefty LMI fee. Other government-related incentives include the First Home Assistance Scheme which provides significant concessions or exemptions to Stamp Duty, or the First Home Owner Grant
which allows first home buyers buying a new home or substantially renovating a home to receive a $10,000 grant. The First Home Super Saver Scheme (FHSS) allows individuals to save money for a first home inside their superannuation fund. This could help first home buyers save faster with the concessional tax treatment within their super. Finally, for those individuals who love to rent but also dream of owning their own home, there exists Rent-to-Buy or Rent-to-Own schemes whereby individuals can pay rent to build equity in a property whilst also having the option to buy the property at the end of the renting agreement.
Property
By thinking outside the box and harnessing the power of strategies akin to crowdfunding, “where there is a will, there is a way”, has never rung truer for those wanting to jump on the Sydney property market.
Although these agreements have higher risks, costs and interest rates involved, it may be a viable alternative to renting for indefinite periods of time. Similarly, under a Shared Equity Platform deal, a tenant will pay normal market rent whilst acquiring a fractional percentage in the property. Over time, this interest in the property may grow and the tenant may sell their percentage to use as their deposit. With so many financial products, incentives and policies designed to disrupt the linear and traditional property purchasing method, entering the property market may be more possible than previously envisaged. If you’re thinking about making the move, begin by exploring the plethora of options that could work for you, seek advice and guidance from the appropriate professionals, and begin the exciting journey towards property ownership.•
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