Yahoo Finance Commonwealth Bank's huge $10k move to help Aussies crack the property market
Potential home owners will be able to secure the keys to their castle for much less than the average Aussie.
Commonwealth Bank (CBA) has announced a new agreement that will help homebuyers crack into the property market. People usually have to save tens or hundreds of thousands of dollars for a deposit on a home and some have to wait decades until they can comfortably get to that point.
Australia's biggest bank has partnered with property tech platform, Coposit, who will let prospective homeowners put down just a $10,000 deposit to get the keys to their castle. The initiative will target people looking for an off-the-plan build.
“Housing affordability and undersupply are some of the most pressing issues nationally, requiring a multifaceted approach involving innovative, sustainable solutions and cooperation between all industry stakeholders,” CBA Group Executive Business Banking Mike Vacy-Lyle said in a statement.
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"Initiatives like this could make a real difference, particularly for first home buyers, by allowing them to secure the purchase of their first home while continuing to save for the initial deposit until the property is built."
Property developers traditionally require a 10 per cent upfront deposit for off-the-plan contracts for new apartments or townhouses. The average house price in Sydney is sitting at more than $1.6 million, meaning prospective buyers need to have at least $160,000 to start on their property journey.
CBA believes the move will also deliver "greater certainty" for property developers as they will be able to include the deposits when seeking financing on their projects.
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The bank hopes it will help fast-track new housing supply into the market, which has been massively lacking in the past few months.
A combination of increasing housing supply costs, red tape, a declining number of tradies coming into the industry, and inflation have caused new home starts to drop to their lowest level in more than a decade.
Who is eligible for the initiative?
Coposit isn't allowing anyone to hand over their $10,000 to get a property.
It will be targeted at people purchasing off-the-plan properties before they're built. The $10,000 deposit is the minimum Coposit will accept.
Prior to settlement, the buyer must pay the balance of the required deposit in weekly, interest-free payments during the construction phase until they hit the required 10 per cent of the purchase price. They'll then finalise settlement through traditional financing channels upon completion.
This allows people to secure a property while the property gets built without needing tens of thousands of dollars in their bank accounts.
To be qualified for this program, applicants will be assessed on their finances to see whether they will be able to afford the 10 per cent deposit when it's needed.
If a home buyer isn't projected to be able to front the 10 per cent deposit, then it's up to the developer to decide whether to put the applicant on a delayed payment plan or put the property back on the market.
Property developers have traditionally been forced to achieve a certain level of off-the-plan sales (between 30 to 50 per cent) before a lender would provide the finances needed for construction to begin.
Coposit’s CEO and co-founder Chris Ferris said the partnership with CBA will hopefully ease the housing crisis being felt across the country.
“In an environment where house prices continue to increase, it has become even harder for buyers to accumulate the savings required for an initial deposit," he said.
"Coposit’s agreement with CBA will help more developers secure the pre-sales needed to get their projects underway and start their builds sooner, which is critical in helping the industry increase supply.”
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