COULD this home ownership scheme from the UK be the answer to Australia’s housing affordability woes?
It’s called “staircasing” and it works like this: Instead of buying a house outright, homeowners are able to purchase a share in a property and gradually increase this stake as their savings grow — effectively allowing homeowners to “staircase” up to full ownership.
Classified as a type of shared ownership arrangement, staircasing was announced as a part of the UK government’s Help To Buy initiate in 2013. Other Help To Buy schemes include government-backed equity loans, mortgage guarantees and home savings accounts.
Generally, the homebuyer starts with purchasing at least 25 per cent of the equity in the property (but no more than 75 per cent) through a mortgage, while renting the remainder of the balance from a housing association.
COULD IT WORK DOWN UNDER?
At the moment, the dominant focus here is on equity loans. An equity loan is a low interest loan, subsidised by the government, that goes towards your deposit or boosts your borrowing power. Most states offer a type of shared ownership equity loan scheme but the level of subsidy varies among the states and territories.
But Mortgage Choice CEO John Flavell said a staircasing scheme could work well Down Under and benefit many Australians struggling to achieve home ownership.
“Anything that helps Australians into the property market should be applauded. While ‘staircasing’ is a home ownership technique that is not currently employed in Australia, there is nothing to suggest a scheme like that couldn’t work here,” Mr Flavell told news.com.au.
BACKLASH IN THE UK
The Help to Buy shared ownership scheme has received some criticism in the UK, however. Critics of the scheme argue that buyers have few rights. For example, despite only owning a share of the property, buyers are still responsible for 100 per cent of the service charges and maintenance costs.
Further, when the time comes to sell, the sale is split along the lines of the original agreement, even if the homeowner paid for and carried out improvements to the property.
“At Mortgage Choice, we have long advocated the need for the government to introduce new first homebuyer schemes. While ‘staircasing’ could be one scheme, another could involve superannuation,” he said.
“For example, if we were to allow first home buyers to access their superannuation for a house deposit, this could reduce the need for Lenders Mortgage Insurance and help these buyers jump onto the property ladder.
“And, at the end of the day, it is only fair that first home buyers should be allowed to invest part of their super in their own bricks and mortar.”
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