A new fintech startup, HomeShare, is set to launch in New Zealand later this year, aiming to democratize access to the property market by allowing investors to buy shares in residential properties. This initiative seeks to address the challenge of high property prices, offering a potential pathway for individuals who find traditional homeownership out of reach.
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Key Takeaways:
- HomeShare will offer fractional ownership in residential properties.
- The company has worked with the Financial Markets Authority (FMA) in its fintech sandbox, a key differentiator from previous attempts.
- Investors can buy shares for as low as $80 (based on an $800k property example).
- The platform plans an October launch and aims to expand nationwide.
What is Fractional Property Investment?
Fractional property investment allows multiple investors to collectively own a single property by purchasing shares or units in it. Instead of buying the entire asset, individuals can invest smaller amounts to gain exposure to the real estate market. Investors typically share in the rental income generated by the property and benefit from any appreciation in its value, while also contributing proportionally to costs like maintenance and rates.
Learning from Past Attempts in NZ
The concept of fractional property ownership isn’t entirely new to New Zealand. Previous ventures like The Property Crowd and The Ownery have attempted similar models in the past decade, facing challenges. The Property Crowd had its crowdfunding license suspended by the FMA in 2022 due to contraventions of obligations, though no investors were using the platform at the time. The Ownery, launched in 2016, reportedly saw underwhelming investor interest.
HomeShare founder Martin van Blerk highlights a crucial difference for his venture: working closely with the FMA through its fintech sandbox program. This regulatory sandbox allows startups to test innovative financial products in a controlled environment, gaining clarity on regulatory expectations and adjusting their models accordingly. This collaboration with the regulator is positioned as a key factor in HomeShare’s potential success and investor confidence.
HomeShare website interface showing property listing and investment details.
How the Investment Works
HomeShare plans to offer 10,000 shares per property, based on an independent valuation. For example, an $800,000 property would have shares priced at $80 each. Investors can buy single shares or multiple shares.
Shareholders will receive a proportional share of the rental income the property generates. Conversely, they will also be responsible for a proportional share of ownership costs, including property management fees, rates, insurance, and maintenance.
For investors looking to exit their position, HomeShare intends to operate a secondary marketplace where shares can be sold. The company will likely set parameters or a reasonable price range for these secondary market transactions.
Fees will apply when buying and selling shares. HomeShare indicates a fee of 0.95% for first-home buyers, with a slightly higher rate for traditional investors.
Implications for Investors and the Market
The HomeShare model has significant implications, particularly for those struggling to enter the property market.
Increased Accessibility
By breaking down the cost of a property into small share units, HomeShare makes real estate investment accessible to individuals with limited capital who cannot afford a traditional deposit or mortgage. This aligns with the company’s stated goal of making housing more affordable and easier to access.
Diversification Potential
For existing property owners or investors, the platform offers a simple way to diversify their real estate holdings across multiple properties and potentially different regions of New Zealand, rather than concentrating capital in a single asset. This can help mitigate location-specific risks.
Market Shift
While past attempts have faltered, HomeShare believes the market may be ready for this model, noting its popularity in other countries. Its success could signal a shift towards more diverse and accessible forms of property investment in New Zealand.
HomeShare founder Martin van Blerk discussing the platform's goals.
The Path Forward
HomeShare is targeting an October launch, with its first property expected to be located in Hamilton. The long-term vision includes expanding to offer shares in properties across New Zealand.
The success of HomeShare will likely depend on investor confidence, regulatory clarity, the performance of the underlying properties, and the liquidity of the secondary market. While fractional ownership offers benefits, potential investors should understand the risks involved, including market fluctuations, potential difficulties in selling shares, and the costs associated with ownership and transactions.
Conclusion
HomeShare represents a compelling new attempt to tackle property market accessibility challenges in New Zealand through a fintech solution. By offering fractional ownership and emphasizing its collaboration with the FMA, the company aims to build a more robust and trusted platform than its predecessors. As the October launch approaches, market participants will be watching closely to see if this model can successfully open the door to property investment for a wider range of New Zealanders.
Stay informed on the latest fintech and property market developments. Explore related articles on alternative investments or the New Zealand housing market.
