By Fiona Rotherham
Auckland start-up The Ownery Ltd is offering a new way to enter the housing market by buying shares in a company that then buys a house.
Co-founders Paul Jacobs and Kurt Settle 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.
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 percent 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 percent 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 percent 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.
Jacobs said 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.