(Image courtesy 60 Minutes Australia)
High housing prices in Australia have, for some time now been causing low rates of home ownership among millennials, with a study by HSBC bank suggesting that only 28% of Australians aged between 18 and 36 own the home they live in. According to this study, only United Arab Emirates has a lower rate of home ownership among millennials compared to Australian situation. The survey involved 9000 people across nine countries.
Further, more than 83 percent of those Australians surveyed in the study were optimistic of buying a home within five years. The housing rates in Sydney have gone up by more than 10% while countrywide the prices rose 12.9 percent in the past 12 months. Salaries are expected to go up by 1.6 percent.
The Parliament of Australia also admits that rising house prices are a cause for lack of affordability of houses and homes and the declining levels of home ownership in the country. The rate of renting in proportion to household income has surpassed 31% of their income, beyond the housing stress rate of 30 percent.
Further, Sydney was ranked by Demographia as second worst among those countries with poor housing affordability (expenditure on housing (prices, mortgage payments or rents) and household incomes) highest house prices with its house prices almost 13 times higher than the median household income. It was beaten by Hong Kong where the house prices were about 20 times higher than household incomes.
Through the Affordable Housing Working Group, the government is looking into financing instruments such as Housing Supply Bonds and an Affordable Housing Finance Corporation Model to help improve home ownership rates and house affordability.
The high risks and low returns in affordable house projects also discourages institutional investment in the affordable end of the residential market. According to recent news, the market could be facing a slow down in property sales, and could face a downward price trend. According to the news, the aging interest-only loans and a credit crunch could lead to a sudden property market downturn fueled by steepening credit costs. This could mean further challenges for investors willing to enter these markets.
Recently, the Saxo Bank’s latest “Outrageous Predictions” report said that the Reserve Bank could be forced to step in with a $300 billion bailout program to rescue Australia’s banks if the housing credit crunch causes property prices to crash by 50 per cent and plunges the country into recession.
Coming from that background, RealRenta crypto startup sees the possibility of using a real estate cryptocurrency token and a real estate management platform to at least face some of the affordability, cost, and investment problems from a different angle. The token could, for instance, help first time home buyers who are struggling to enter the Australian property market by lowering the barrier to entry in investing in real estate property markets.
The startup already has a "do-it-yourself cloud-based property management software platform" that helps individuals (real estate property owners) to manage their property without real estate agents thus lowering rental rates. It works for residential and commercial investment property owners that want to save money and maximize profits. It automates tasks and removes unnecessary practices to remove property management fees, resulting in lower rental rates and increased returns for owners. The platform allows for payment and management of transactions on cloud. It is also a platform where property owners and agents can advertise property.
Apart from the already working platform as a property management solution, the startup will be launching House Coin next year as a way for Australians to access a more affordable way of investing in property in the country. The token will be tied to the value of Australian residential property and it basically works like a blockchain-based real estate property tokenization platform where large portions are broken into fragments that can be affordable as units of ownership valued in cryptocurrency token. This means anyone, for as low as a few dollars, will be able to invest in property markets.
Using the token means many more people who would not have participated in REITs would invest in real estate and although it works like many other platforms that allow people to invest with as little as $50 or $100, crypto may bring in one or two advantages. High prices of real estate means one may not invest in the property but with fragments of ownership, the property would be more affordable.
House Coin, which is set to be released next year, will be a security coin to make the investment stable. It will afford minority groups a chance to invest in real estate including women according to Marlene Liontis.
After the release of the token, Marlene is planning to be holding investment seminars tailored to women and those with limited resources.
It will also be a good option for millennials who are looking for significant investments. Currently, Australian millennials have significantly larger savings than previous generations but high price houses means they cannot easily invest in the real estate property markets but the token will make that possible.