Home ownership is very important to Australians.
Its cultural importance was captured in The Castle, a cult movie every adult Australian has seen, where a working class family fights to protect their house from developers trying to bulldoze it. It’s also important politically. Widespread home ownership, studies have found, has meant Australia is one of the world’s most equal countries.
It’s also important for investors.
“Almost 65 per cent of this nation’s wealth is in residential property and investors in this country have made very significant returns. It continues to be an attractive asset class,” says Anthony Millet, CEO of BrickX.
Many investors try to tap into property. But when they do they typically run into two problems. The first and most obvious is affordability. House prices in Australia are among the highest in the world, behind only Hong Kong and Tokyo. In Sydney, the median house price is a scorching A$1ml.
The second issue is accessibility. Buying a house involves much preparation and hard work. And even after all the groundwork is laid, a potential buyer is never guaranteed an offer of sale.
So Mr Millet founded BrickX to try and shake things up.
“We looked at the market and the products that were out there. None catered for residential property investment, other than by buying the entire house - which of course is not accessible and affordable for everyone. We wanted to launch a platform that allowed all Australians to invest in desirable residential property," he says.
"Crowdfunding has been around for half a decade, the issue in this country is that the residential market mostly goes to auction, and you can’t really crowdfund those. So we needed to solve for that. In addition we hadn’t seen any solutions that solved for the lack of liquidity - this was a key priority for us."
BrickX is a platform that allows investors to buy fractions of a property—equity in a house, as it were, called “bricks”. The company buys residential properties upfront and splits them into 10,000 bricks, which can be bought for less than $100.
With every brick owned, rental income is streamed. There are no fixed terms, so investors can come and go as they wish. All the properties can be viewed on the company’s website. The company profits through a transaction fee: when investors buy or sell their bricks, BrickX takes 1.75 per cent.
The company is continuing to buy properties and expand its offering. As it does so, it is highly selective about which houses – and in particular which suburb – it buys in to.
“We are interested in the type of suburbs that have high desirability for owners and renters, in good years they all consistently perform for people that have more money and want to leverage themselves up. In more challenging years they’re the ones that still do OK. They thus provide most stability through difficult times.”
And difficult times are worth considering. With the high prices and a decades-long upswing, it has been argued that Australian property is in a bubble. The decibel level was raised in 2015 when the Treasury Secretary told Parliament that Sydney was “unequivocally” bubbling.
But Mr Millet is disagrees, and says talk of a bubble falsely aggregates the Australian market.
"I think what we’ve seen over the last few years is too much of a generalization of the Australian market.
"Going forwards what I think you’ll find is that we’ll have a much more exaggerated two speed residential market where the desirable suburbs will continue to have good demand and prove to be good investments but other suburbs where there is overdevelopment will struggle."
And Mr Millet remains focused on the future, and on that score his company has seen great success among the young.
"The platform we’ve built is seeing great traction with millennials: 50 per cent of our users are under 35, many of whom are saving their house deposit inline with the market. Younger investors, as young as 18 are using the platform to learn about the market. So we have a strong educational element on the website."
26 October 2020
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