With skyrocketing property prices, and homeownership further and further out of reach for many, an Australian rent-to-own scheme designed by two millennial mates will see the first cohort of customers in their own homes in three months.
OwnHome co-founded by Tim Harley, who led the expansion of Wise (TransferWise) into the Middle East, has launched the new venture with fellow entrepreneur James Bowe, motivated by their generation’s struggle to afford a first home.
After the pair secured start-up funding through the Commonwealth Bank’s x15 Xccelerate program, the business has just closed its first capital raise securing $3.6 million in funds from global investors including Global Founders Capital, Entrée Capital, AfterWork and InVentures.
In a nutshell, OwnHome buys a property for the customer. This customer is able to move into the home straight away and simply make a monthly payment to OwnHome. Within the first three to seven years, the customer is able to buy the property off OwnHome at a pre-agreed price.
Demand has been strong with a growing number of aspiring homeowners already on the waitlist. There are 110,000 first homebuyers every year in Australia and currently 60 per cent require support from their family and friends to overcome the deposit hurdle.
Over the year, Sydney house prices have jumped by 12.6% to $1,309,195, meaning that the deposit required for a median Sydney house is $261,839.
Co-Founder James Bowe said that OwnHome is the solution for aspiring homeowners who are facing soaring property prices in the face of stagnant wage growth.
“It takes up to a decade longer to save a deposit than it did 50 years ago and more and more homebuyers, if they have the option, are relying on the bank of Mum and Dad to get onto the property ladder,” Bowe said.
“OwnHome is the only rent-to-own model that provides a path to home ownership in the area you want to live in that doesn’t require hundreds of thousands of dollars for a deposit,” he said.
OwnHome is the only product in Australia that allows a buyer to purchase a pre-existing home on the market in established suburbs. It gives first homebuyers an opportunity to save for their home while they live in it.
Avi Eyal, a major investor in OwnHome and the Managing Director for Entrée Capital, said the rent-to-own business model is taking off in the US, and OwnHome is bringing a much-needed solution to Australia.
“We believe James and Tim have the vision, experience, and drive to deliver this new path to homeownership for Australians,” Eyal said.
“Residential housing represents the world’s largest asset class at $160T – the size of the opportunity for OwnHome is enormous.
“Australia stands out as a country with one of the most acute homeownership issues globally, and OwnHome is forging a new way for hard-working Australians to realise their dream of homeownership,” he said.
The initial rollout of OwnHome is taking place in Sydney, with a plan to expand services to other capital cities in the near future.
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