Major bank invests in deposit disrupter OwnHome

The Commonwealth Bank of Australia (CBA) – via its venture-scaling entity x15ventures – has become a minority investor in deposit disrupter OwnHome.

The major bank joined other existing investors (including GFC, Entrée Capital, AfterWork, and Possible Ventures) in contributing to the company’s $31 million Series A fundraising round led by strategic partner, SquarePeg.

The money will be used to fuel the growth of the company that launched in March 2021 (with the help of $150,000 from x15ventures after winning its fast-tracked program, Xccelerate 2020).

This fundraise will help launch OwnHome into the Greater Sydney housing market.

How it works

The start-up aims to help mortgage-worthy borrowers buy a property sooner by helping them overcome the deposit hurdle.

It does this by buying a property for a customer (and owning the title to the home), but allows the customer to move into the home immediately on a rent-to-buy contract. Customers pay an upfront fee (a 2.5 per cent “initial contribution”) and make monthly payments to OwnHome that build their deposit over time.

The arrangement enables the customer to purchase the property off OwnHome in three to seven years for a pre-arranged price, with a minimum lease commitment of two years.

They can live in the OwnHome home for up to five years before they must purchase it for themselves – with the accrued deposit going toward their purchase.

If they decide not to purchase the home, they’re paid out of their equity in the home, less fees.

OwnHome announced that it had helped its first clients purchase their home outright under its rent-to-own model last year and has since helped nine families buy their home.

It plans to buy 200 homes for approved customers over the next two years and reportedly now has more than 3,500 applicants on its waitlist.

‘An alternative path to home ownership’

CBA and x15ventures noted that the start-up provided an “alternative path to home ownership for aspiring buyers who can afford regular mortgage repayments but are looking to overcome the deposit hurdle, particularly those with no access to parental financial support”.

Toby Norton-Smith, managing director of x15, flagged the start-up has been launched amid a growing housing affordability issue in Australia, stating: “Housing affordability is a challenge for many Australians, particularly young people and their families. 

“We believe OwnHome will provide an alternative path to home ownership, particularly for first home buyers who are responsible savers but aren’t able to rely on the bank of mum and dad for help with the deposit,” Mr Norton-Smith said.

“This is a particularly satisfying investment to make, given we’ve worked with the OwnHome team since they first founded and launched with the support of our Xccelerate program, and because our strategic VC partner SquarePeg is leading the round.”

Angus Sullivan, CBA’s group executive retail banking services, added: “OwnHome is helping to address one of the biggest challenges currently facing first-time home buyers, which is finding new ways to save and put down a deposit on their cherished property.

“As Australia’s largest lender to first homebuyers, innovating and improving the home buying journey is the cornerstone of what we are doing to help our customers and today’s investment in OwnHome will provide greater choice to those who dream of home ownership but seek a different route to the traditional rent-and-save approach.” 

OwnHome co-founders James Bowe and Tim Harley welcomed the investment, with Mr Bowe commenting: “In just over a year, we’ve continued to grow our team and customer base, partnered with :Different, and have recently expanded into the Queensland property market. 

“Xccelerate2020 helped set us up for success in the early days of OwnHome, providing us with the funds and expertise to take us from a small team to a growing alternative for those eager to secure their path to home ownership today.

“As we scale and shape the model in Australia we will continue to benefit significantly from the support of like-minded partners in CBA and x15, who share our mission to help more people on the road to home ownership.”

Previously, Mr Bowe worked in the San Francisco office of Bain & Company, while Mr Harley was the head of Middle East for TransferWise and at Macquarie Capital before that.

OwnHome joins a growing portfolio of ventures at x15 that relate to the home-buying process, including free credit score provider Credit Savvy, conveyancing platform Home-In, property management company :Different, and a soon-to-launch digital home loan proposition, Unloan.

Housing affordability in focus

The issue of housing affordability (or lack thereof) has been in the spotlight recently as house prices run rampant in Australia.

Indeed, it now takes around 10 years to save for a home deposit in Australia (according to the ANZ CoreLogic Housing Affordability Report), up from six years in the 1990s.

Average home loan amounts have risen by over 340 per cent in the last 20 years, the researchers recently found, with the median house price having surpassed $1 million for the first time. However, wages growth has not risen in tandem.

This week, Prime Minister Scott Morrison acknowledged that it is “terribly hard” for people to own their own home, as house prices continue to hit new records. The government has provided home-ownership assistance programmes during the past three years through initiatives like HomeBuilder and the Home Guarantee Scheme, however there have been calls for more to be done.

A federal housing affordability inquiry is expected to hand down its final report in the coming weeks outlining recommendations on ways to improve housing affordability.

[Related: Frydenberg promises to press RBA, APRA on housing]