Plans for equity share home lending

17 December 2004

One of the many recommendations to come from the Government’s investigation into First Home Ownership is the concept of equity sharing between home owners and institutional investors.

Basically, an equity sharing scheme involves investors lending money to home owners for the purchase of a property, with the equity which has been built up in the property over several years being divided between the investor and the home owner on sale of the property.

Last week, an Australian asset management company announced its plans to release an equity share home ownership scheme, which would see more than $500 million invested in residential property in the form of an investment fund.

According to the asset manager the fund would lend money to home owners at lower rates than those being offered by the banks, and then any equity built up in the property over the years of ownership would be divided between the home owner and the fund on a 60/40 per cent basis.

It is expected that the fund would invest in around 6,000 homes across Australia, and return around 11 per cent to investors over a five year period.

Release of the fund has been planned for June 2005.