“Staircasing” could help more Aussies enter the property market

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Commonwealth Bank, in its Future Home Insights Series, identified a number of trends that are predicted to significantly influence the Australian housing market “from now until 2030 and beyond.”

One of the emerging pathways Aussies may increasingly turn to in the future to finance homeownership is “staircasing.” The scheme works this way: instead of buying their homes outright, homebuyers opt to purchase a share in the property and gradually increase their stake as their savings grow – effectively allowing them to “staircase” their way up to full homeownership.

Classified as a type of shared ownership arrangement, staircasing was originally announced as part of the UK government’s Help to Buy Initiative in 2013. Other Help to Buy schemes include government-backed equity loans, home savings accounts, and mortgage guarantees.

UK households are eligible for the shared ownership staircasing scheme if they earn £80,000 a year or less (or £90,000 a year or less in London). 

Generally, homebuyers start by purchasing at least 25% of the equity in the property (without exceeding 75%) through a mortgage, while renting the remainder of the balance from a housing association.

Shared ownership isn’t as well-developed in Australia as it is in the UK. At the moment, the dominant focus in our country is on equity loans. Equity loans are low-interest loans that are subsidised by the government. Most states offer a type of shared ownership equity loan scheme, but the level of subsidy varies among the states and territories.

Many experts—including John Flavell, CEO of Mortgage Choice—think staircasing could work well in the Australian mortgage market, as it could significantly benefit Aussies struggling to purchase homes.

“Anything that helps Australians into the property market should be applauded. While ‘staircasing’ is a home ownership technique that is not currently employed in Australia, there is nothing to suggest a scheme like that couldn’t work here,” he said.
 
“At the end of the day, I believe the time has come for the government to rethink the schemes and grants they currently have in place to help and support first home buyers. This market is increasingly struggling to get a foot on the property ladder, and they will continue to struggle unless something is done.”

 

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