Shared property has solid build-up
SHARING is the new black when it comes to getting on the first rung of the real estate ladder.
Shared equity schemes and fractional investments are among the expanding options for property owner-occupiers and investors. And the strategy of siblings splitting purchase costs is growing in popularity.
Several state government authorities provide shared equity schemes, where a lender typically contributes about one quarter of the purchase price and owns that proportion of the property.
HomeStart Finance chief executive John Oliver said his organisation had settled more than $100 million of shared equity loans in 10 years.
“The main issue is getting over the notion that you have to share part of your capital gain with your lender,” Mr Oliver said.
“But it is important to note that there are options available to pay out the equity component.”
Saurabh Vashisht and his wife, Priyanka Sharma, bought a home in July this year using HomeStart’s shared equity option.
“We were living in a two-bedroom unit and wanted somewhere bigger and more modern to suit our growing young family,” Mr Vashisht said.
“I hadn’t really heard of shared equity before, but once we realised it would let us borrow enough to buy a three-bedroom home in an area that we thought would be great to raise a family, it seemed like a good choice and we’re happy.”
Property purchases are also increasingly being shared by brothers and sisters. Finance broker Financia’s managing director, Angelo Benedetti, said banks had made it difficult for an individual to have enough assets and income to “get them over the line”.
“I have seen a huge trend towards two siblings buying a property together, whether for investment or to live in, just to get their foot in the door,” Mr Benedetti said. Parents rarely shared purchases with their children, he said, but there had been a boom in parents going guarantor for their children’s mortgages.
“I’m doing four or five parental guarantee loans a week – I used to do three or four a year.”
Fractional investing allows people to buy small slices – often at $100 or less – of an individual investment property and share in its rental income plus the increases, or decreases, in its value.
Australia’s two main fractional investing companies, DomaCom and BrickX, have been expanding their portfolios, but investors in cities such as Sydney and Melbourne have been sharing in the recent property price falls there.
‘We were living in a two-bedroom unit and wanted somewhere bigger and more modern to suit our growing young family’ Homebuyer Saurabh Vashisht