New options put renters first in housing affordability | Another day in paradise | Flat Chat Forum: Your Questions Answered




A A A

You must be registered and logged in to reply to posts or post new topics. Click on "How to Use This Forum" for simple instructions on how to get on board. NB: Please do not use your real name or email address as your screen name - if you do it will be changed to something less insecure.

Avatar

Please consider registering
Guest

Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

Register Lost password?
sp_Feed sp_PrintTopic sp_TopicIcon
New options put renters first in housing affordability
sp_BlogLinkWhite Read the original blog post
Avatar
JimmyT
Admin
Forum Posts: 4496
Member Since:
06/01/2014
sp_UserOfflineSmall Offline
1
20/08/2017 - 6:32 pm
sp_Permalink sp_Print

There are two new buzz-phrases in the housing affordability lexicon – ‘build-to-rent’ and ‘rent-to-own’.

Build-to-rent and rent-to-own are at opposite ends of the housing culture spectrum but both are being touted as potential answers to the problem of too many people not being able to afford to live where they want in our cities.

Build-to-rent sidesteps both the traditional Australian obsession with owning your home – and rental laws that encourage a rapid turnover of tenants to maximise income – by offering long-term leases at reasonable rates in buildings where nobody is an owner-occupier.

As revealed in the AFR recently, NSW Treasurer Dominic Perrottet is exploring ways of encouraging developers to build apartment blocks specifically for renters who will be able to live there longer, while paying rents that are more allied to current inflation rates rather than the potential craziness of the property markets.

Build-to-rent blocks will have one corporate landlord per building, shutting out the speculative investors who flip tenants every time local rents rise.  They will also give long-term tenants security of tenure that they currently don’t enjoy.

Rent-to-own, in contrast, rather than undermining the prevailing attitude to ownership, taps into it by allowing people who can’t raise mortgages by normal means to buy their rented homes.

They do this by paying over the odds in rent for a few years until they have built enough equity to get a mortgage.

The process varies from state to state (and contract to contract) but basically the renter pays a relatively small deposit plus rent that may be as much as 25 percent higher than similar properties.

In exchange, they know that after three to five years they can purchase the property at a pre-arranged price, offsetting the equity they have paid against the cost.

This is particularly attractive to buyers who can’t raise a mortgage by normal means for reasons ranging from poor credit histories to being recent immigrants.

However, this is a largely unregulated sector which is open to abuse and exploitation.  But leading property lawyer Anthony Cordato says there is a clear demand for rent-to-own because potential owners can lock in the purchase price while setting money aside to pay for it.

“Why don’t they just set the extra money aside for a deposit?’ he explains. “Because it gives them a set price goal, rather than watching property values getting further away, the longer it takes for them to raise the money.”

Rent-to-own also allows the tenant to make improvements to the property that they can then benefit from when they eventually buy. But it has its pitfalls. Rent-to-own tenants can lose everything if they can’t raise the purchase price when their contract term is up.

“The problem is that there are few clear guidelines or regulations in this sector,” says Mr Cordato. “Every new contract is almost starting from scratch and that can only lead to unforeseen problems down the track.”

One thing is certain – unfettered market forces are no longer the only way of putting roofs over Australian heads, and lateral thinking is already changing the residential landscape.

Avatar
Puddn
Flat(chat)Mate
Members
Forum Posts: 54
Member Since:
20/03/2015
sp_UserOfflineSmall Offline
2
22/08/2017 - 8:41 am
sp_Permalink sp_Print

Interesting.

From 2004-2006, a large developer in NSW offered 'off-the-plan' purchases that included:

1. 50% rebate of rent paid on another of their already built apartments to be counted towards the deposit - including 6.5% interest on that money. Rents at that time were $400-$500 a week.

2. An expectation that the 'off-the-plan' purchase would not settle for at least two years

3. For a 5% cash deposit on one apartment, you could purchase two apartments!

4. Guaranteed finance from one major or merchant bank

Needless to say, the GFC hit, the valuations of the apartments fell 20%, the merchant bank went belly-up, the major bank tightened its lending criteria, the developer tried to squib on its deposit agreement.

Avatar
Puddn
Flat(chat)Mate
Members
Forum Posts: 54
Member Since:
20/03/2015
sp_UserOfflineSmall Offline
3
22/08/2017 - 8:44 am
sp_Permalink sp_Print

Forgot to add.

There was also a very generous first-home owners rebate and a waived NSW Government property tax (that alone saved about $25,000!)

Forum Timezone: Australia/Sydney

Most Users Ever Online: 518

Currently Online: dingo, Lady Penelope
32 Guest(s)

Currently Browsing this Page:
1 Guest(s)

Top Posters:

kiwipaul: 613

struggler: 459

Austman: 304

Billen Ben: 232

Millie: 203

Kangaroo: 168

considerate band fair: 167

Cosmo: 166

FlatChatFan: 147

daphne diaphanous: 137

Newest Members:

Tim349VicPl

Mariner

aylwardgame

reddant

danih

slicendice

Maun Warrior

Rayjen

Swaye1956

nitin964

Forum Stats:

Groups: 4

Forums: 46

Topics: 4279

Posts: 20222

 

Member Stats:

Guest Posters: 241

Members: 4871

Moderators: 4

Admins: 1

Administrators: JimmyT

Moderators: Whale, Sir Humphrey, scotlandx, Lady Penelope