A new Kiwi startup is offering New Zealanders the chance to join the Auckland property market for a rather low amount of money.
The Ownery has launched a scheme that allows New Zealanders to buy shares in a company that then buys a house in Auckland.
Those shareholders effectively own equity in a house.
The company offers what it calls "HouseShares" as a different way for people to climb the Auckland property ladder.
These shares start as low as $500.
The company will be mostly targetting cheaper homes.
The Ownery co-founders Paul Jacobs and Kurt Settle are Kiwis who have returned home after stints of living overseas.
The say they want to offer people the chance to grow their savings into the housing market because many, particularly younger Kiwis, face an uphill battle trying to save for a deposit as the median price in Auckland edges towards $1 million and banks require minimum deposits.
"Savers can effectively become part owners of carefully selected Auckland houses and get a foot on the property ladder starting with as little as $500. The value of savings at any time will be directly linked to the value of the house, or houses in which they have chosen to save in," a statement from the company read.
There are, of course, some risks associated with this venture, including poor timing, property price changes, mortgage interest rates, etc.
How it works
The business model is similar to residential equity crowd-funding but doesn't require The Ownery to have a crowd-funding licence. Rather, each company has to put out a product disclosure statement that requires more disclosure than crowd-funding and will be monitored by the Financial Markets Authority.
The Ownery clips the ticket on the investments by charging those buying shares an up-front entry fee of 4 to 5 per cent of the amount they put in (set at a minimum $500), and the co-founders' associate company, Houseshare Management Ltd, which will manage the properties, will charge an annual management fee of up to 1.5 per cent of the property value.
Each company will own only one house and shareholders can exit anytime by selling their shares with no fee charged unless the shares are sold to a third party.
Jacobs, chief executive of The Ownery, said its model differs from property syndication by requiring a lower initial investment.
The value of owners' savings will move in step with the housing market, whether it goes up or down.
No bank debt will be used by house share companies to purchase the houses but each constitution will allow borrowing of up to 20 per cent of the property's value for buying back shares of those exiting and other big ticket items not covered by insurance.
The money invested will be held in trust until each property is bought and refunded if the sale falls through.
For Kiwi residents only
According to Jacobs, share ownership is being restricted to Kiwi residents rather than offshore investors because the model was intended to resolve New Zealand's shrinking home ownership problem rather than as a pure investment.