Australian property tech firm OwnHome has secured $31 million in funding, with the Commonwealth Bank of Australia joining the investment round through its x15ventures division. The round was led by VC company Square Peg, with other investors including Global Founders Capital, Entree Capital, AfterWork, and Possible Ventures. OwnHome’s model, known as rent-to-own, eliminates the need for costly deposit and stamp duty charges, allowing first-time home buyers to move in with an initial 1.5% fee and build equity of 2.5% in their home each year. They can then choose to acquire the property for a pre-determined price within 3-7 years.
While Commonwealth Bank of Australia (CBA) has no current plans to offer OwnHome’s rent-to-own model through its app, the bank hopes that this innovative form of homeownership will become more widely accepted. Prospective homebuyers who consider OwnHome’s model could expect to pay around $25,000 upfront to move into a $1 million property, taking into account fees and charges. According to OwnHome Co-founder James Bowe, this represents just 10% of the upfront costs of a similar property with a 20% deposit and stamp duty. Toby Norton-Smith, MD at X15ventures at CBA, sees significant potential in the OwnHome model for Australian homebuyers.
According to Bowe, a significant upfront outlay of approximately $350,000 is now required for a 20% deposit and stamp duty on the median priced house in Sydney. This poses a challenge for many Australians as they are not eligible for government support or cannot access low deposit options. Additionally, 5% loans are rare, and government schemes have price limits that exclude most properties within a reasonable commuting distance in major cities.
Co-founder Tim Harley reported that within six months, the company received more than 3,500 applications, 1,500 of which were in December.
Harley explained that the deposit hurdle is the biggest obstacle to housing affordability, not serviceability. He noted that the Bank of Mum and Dad has become a determining factor in homeownership, with two out of three successful first homebuyers receiving financial support. The company’s model allows individuals to build their deposit over time while living in their property today.