Home buyers who could 'never afford to buy' get into market one brick at a time

Soaring property prices in Sydney and Melbourne have left many feeling priced out of home ownership. But some are getting in without spending thousands of dollars on a deposit – instead, they may need to spend only $100.

Take Tegan Lawson, 33, a renter in Clovelly and a single mum. She now owns real estate in Bondi, Annandale, Double Bay and Enmore. 

But she doesn’t have huge mortgages nor does she own the properties alone. Rather, she owns shares in the homes using a fractional investment platform that allows her to buy with many other property investors she’s never met.

While shared ownership in this way isn’t the traditional method of getting a foot on the ladder, Ms Lawson says it’s the only way she could afford a slice of Sydney real estate.

“It looked like I’d never be able to get into the property market. Even though it’s only a minuscule part of a property it feels like a step,” Ms Lawson said.

Called BrickX, the platform allows hopeful property buyers to get into the market for cheap, by buying a portion of ownership or “bricks” in select homes. It’s an investment model still in its infancy – they have eight properties available for investors since their launch in September 2016.

“I don’t know yet if it will give me a lot of return [in the long term]. It’s small returns at the moment but I see them growing,” she said.

And while she has yet to buy a home for herself and her daughter, the few dollars she receives in rental income she saves for more bricks.

“It has given me a sense of accomplishment to own a small piece of property in a place like that,” she said.

“There is no other way for me to buy property – I don’t have a partner or a second income so buying on my own is a pipedream.”

The cost of buying in an inner-city location is usually about $1 million, but the cost of buying a share in the same property starts from about $100 on BrickX.

Another platform, DomaCom, offers a similar fractional investment approach using crowdfunding and has bought more than 35 properties.

Modest prices have helped  millennials become particularly active on the platform, BrickX chief executive Anthony Millet said.

Of those under 35 using the platform, three quarters have not had any previous property ownership.

“Many are saving their deposit this way and using it as a hedge against the market. The average is over 20 bricks each,” Mr Millet said.

As the shares count as a financial investment – the buyer owns a share in the BrickX Trust – those who buy “bricks” are still eligible for the first home owners grant.

Property Investment Professionals of Australia chair Ben Kingsley was not surprised these platforms were becoming more popular with younger buyers.

“We’ll see increases in innovation because it’s getting harder and harder to buy,” Mr Kingsley said.

But he warned that those looking to buy a share of a property should enter into the transaction with a clear understanding of administration costs and fees.

The latest property released on the BrickX platform on Thursday – a one-bedroom apartment in Darlinghurst – costs $57 a brick.

The exterior of the latest property launched on the BrickX platform in Darlinghurst. Photo: Supplied

There are 10,000 bricks assigned per home, though investors can buy multiple bricks, and the property is already tenanted with a 4.3 per cent rental yield.

This is probably the most affordable way to buy into this pricey inner-city enclave.

Even an apartment in Darlinghurst is now just $50,000 from joining the $1 million median price club at $951,000, Domain Group chief economist Andrew Wilson said.

The interior of the Darlinghurst property where investors can buy a share for $57 a ‘brick’. Photo: Supplied

The most expensive apartment bought in the area in the past six months was a three-bedroom unit on Kings Lane for $3,425,000.

Apartment prices are up by more than 60 per cent in the five years to March 2017, while house prices have climbed more than 100 per cent over the same period.

“You have to be prepared to pay high prices in that area, supply is still far short of demand for apartments.”

While apartment prices in the past 12 months have declined by 1.2 per cent, they have risen again over the quarter by 15.3 per cent. Darlinghurst’s houses are in Sydney’s $2 million club.

BresicWhitney residential sales consultant Nic Krasnostein said there was limited property on the market in Darlinghurst and surrounding suburbs.

“It has always been a popular location and that hasn’t changed. There’s limited volume and everything is selling.”