Nearly 2 million Australians use buy now, pay later to purchase clothes, products and food and now they can use the technology to purchase a home.
Property-technology platform and Lakeba Group venture Bricklet launched in 2019 and allows Australians to purchase a fragment of an investment property, in a bid to help buyers enter an increasingly expensive property market.
Bricklet allows users the chance to purchase a ‘Bricklet’ or a small fragment of a property. Users are registered owners on the property’s land title and a property manager acts on behalf of all the Bricklet owners, while Bricklet owners can also be actively involved in managing the property. Users choose the properties they choose to invest in.
“It came out of looking at the challenges of property; wages aren’t going up the same as what property is and it's just getting harder and harder for younger people to get into property,” CEO Darren Younger told Yahoo Finance.
“We wanted to address that and look at if there are ways that we are going to fix that by bringing the price point down - not necessarily the value of the property but if people are able to buy in smaller pieces.”
Now, it’s turning its attention to the buy now, pay later market.
Bricklets range in price from $17,000 to $35,000, with Younger explaining that even at that price point, it could be tricky for some users to access.
“What we found out by speaking to a few of our customers… is that there are people wanting to do more things,” he said.
Users didn’t necessarily want to sink that amount into one investment in one go, so Bricklet began talking to property funds and seeking ways to make the price point lower. They settled on a buy now, pay later offering that allows investors to pay off their Bricklet over 18 months.
“We came up with the concept and we tested the market with it, so we launched it in Sydney, Melbourne and Brisbane as a starting point.”
Since launching that option in November, they’ve nearly sold out of Bricklets for the attached homes.
While there are concerns buy now, pay later technology entrenches dangerous spending habits, Younger says this form is different, in that rather than paying for an expensive dress, you’re paying for an asset that will appreciate in value.
“It’s interesting. Buy now, pay later - it’s the same as a mortgage, really,” he said.
“If you say buy now, pay later is a bad thing, then why do you get a mortgage for a house? You’re basically saying you’re going to pay back $1 million or more.
“The difference with Bricklet is that…. I think this is the first buy now, pay later that’s actually for an asset.”
Bricklet’s birth and forays into buy now, pay later, come as housing affordability continues to pose a challenge to younger homebuyers.
The latest figures show all capital cities in Australia have returned to growth, despite the Covid-19 recession, and according to new Domain data, entry-level property prices are growing faster than any other corner of the market.
Melbourne’s lowest home values increased nearly 45 per cent between the September quarters of 2015 and 2020, with this trend mirrored in Australia’s other capital cities.
Younger says the key is to understand that there are other ways into the market.
“We’re just giving you another way to buy a piece of property,” he said.
“It’s no different to when Uber first started and people were scared to jump into strangers' cars, or Airbnb and having a holiday in a stranger’s house. It just takes some time for people to get their head around it, but there are also a lot of early adopters who like to get on board.”
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