A new product is set to hit the market that could revolutionise the way that first home buyers enter the market, with start-up Coposit set to launch its new app.
With home ownership rates set to reach record lows when the data from the recent Census is announced, major industry players from the big banks to politicians are sounding the alarm on housing affordability, with the majority citing the rising cost of housing as the major impediment to young people getting onto the property ladder.
Now, one Sydney start-up is launching what could seriously disrupt the traditional method by which first home buyers save for a deposit and buy their first home.
Coposit allows buyers to save for a deposit after they have made a $10,000 down payment on a house, and as CEO Chris Ferris explains, it can help young people to get ahead of the rising house prices
“Coposit aims to break the first barrier that first home buyers face when they’re trying to enter the property market, which is the deposit,” he said. “It’s a tool, a free app, that allows clients to secure a property with a $10,000 deposit and then pay the balance over the life of the construction period.”
“That could be two years, if they’re waiting for an apartment project, or 12 months if they’re waiting for house and land. We’ve shifted that period which is usually a nothing period for the purchasers into a period where they can save for that full deposit while locking a price in at today’s market.”
Helping first home buyers to save for a deposit
As an idea, Coposit isn’t far away from the BNPL model, where a small amount up front secures the product, with the rest paid off after purchase.
“The theory is correct, but the main difference is that, with BNPL, you enter into transaction and get your product straight away and then pay it off,” explained Ferris. “With what we’re doing, you secure your property but you don’t actually get it until you’ve paid the full deposit and it’s delivered. Then you have to arrange finance and settle on the property.”
“If you get midway into Coposit and you can’t continue to make the payments – which we haven’t had to date, but does occur - then you don’t get your product until you complete.”
Coposit allows buyers to lock in a 2021 price, saving the difference between now and the price when the property came to market, which in today’s environment, could be significant.
“Some of the biggest problems that people face is that, in New South Wales and particularly Sydney, the average time that it takes to save for a 10% deposit is 5 to 6 years. When you think of the last 5-6 years, we’ve had two or three property cycles.”
“The barrier for a deposit has increased and the goalposts continue to move the longer that it takes people to save.”
“With Coposit, you’re on a level playing field with someone who has half a million saved and have the same buying power, because you can enter into the market today and secure a property while executing that normal savings plan.”
Saving for a deposit made easy for first home buyers
Currently Coposit is only available on new build properties with a lead time, but they are looking to add to that model to incorporate already-built homes. The business model is free to customers and funded on the developer side by helping them to source buyers for their properties.
“We discuss with the developers and have a listings page where they put their developments online,” said Ferris. “We secure their stock, put it on our app and that’s where people buy the property. Effectively, our monetisation comes from the developers who list with us and get sales.”
“What’s important from the data we’ve found from our pilot project is that it’s not just people that can’t save.”
“We’ve had first home buyers who were earning great income but their lifestyle didn’t allow them to save for the 10%, so something like Coposit where you can put the balance down and save on that high income, they can make that work.
“We’ve also had first home buyers who’ve had that 10%, who were able to commit to Coposit and by the end, they get to 10% with us and add on their original 10% to get a 20% deposit. It’s making strong buyers even stronger, while also helping people who can’t get into the market to get in.”
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