Where Is Rent-To-Own Available In Australia?

Rent-to-own models operate differently around Australia. What does rent-to-own look like in your state?

Guides
Home Ownership
by
Erin Howell

Buying a home is increasingly difficult in Australia. Property prices in the Australian market have soared to new heights in the past few years.

Rent-to-own can help homebuyers overcome the deposit hurdle by allowing them to live in their home without needing a substantial deposit upfront. 

Services such as OwnHome are pioneering a new path to homeownership which is designed to help Aussies overcome the challenge of housing access and affordability. In the case of OwnHome, they have also been supported by the Commonwealth Bank.

The model is available across Australia and is popular in Queensland and New South Wales.

Why is it so difficult to save for a 20% deposit?

A report by the Reserve Bank of Australia (2015) stated that the average Australian house price has increased by 7.25% a year for the past 30 years.

Between 2011 and 2022, the average house price in Sydney went from $540,800 to $1.2 million. 

While house prices rises, wages can’t keep up. Data from The Australian Bureau of Statistics shows that annual wage growth has only been hovering at 2-4% between 2011 to 2021. 

The difficulty of getting into the property market has led many to consider alternative low and no-deposit methods of purchasing a home—this includes rent-to-own.

How does rent-to-own work?

Rent to own is a major housing access policy plank in the United Kingdom, United States and Singapore, where it is used to help aspiring homeowners become homeowners. 

In Australia, the model has been gaining popularity, and is now seen as a legitimate option to purchase a home, alongside a handful of other low and no deposit options.

With a rent-to-own agreement, the customer pays rent on a property for a set amount of time, during which time, they also pay towards a security deposit in the home. This gives them the option, but not the obligation to buy the home outright. The tenancy agreement is identical to all other tenancy agreements, and protects the customer in an identical way. 

There is also an additional option or security deposit agreement which sets out the additional payments which can be used to reduce the purchase price when the customer buys the home.

More than just a financial pathway

Rent-to-buy is simple enough once you get your head around the model.

Here at OwnHome, we’re pioneering live-to-own, an expanded version of rent-to-buy which helps first time home buyers a chance to achieve their dreams of homeownership through a rent-to-own pathway.

Not all rent-to-own providers are made equal, so it’s important to do your research before making your choice.

At OwnHome, our program assists those who intend to be owner-occupiers of their home in the Sydney and Queensland area (investment properties do not qualify).

The OwnHome experience

  1. After a rigorous financial evaluation, you’ll be provided with a home shopping budget. OwnHome does all the heavy lifting to ensure that you understand the condition of the home and pay a fair price.
  2. Once you’ve found your dream property, OwnHome buys it for you. You only need a 3% deposit of the sale price to get started (but 1% goes to your security deposit which can be used to buy back your property).
  3. You move in and start growing your security deposit. Part of your fortnightly payment is for rental, and around 35% goes to building your security deposit which will come off the final buyback price.‍
  4. Buy your home anytime after 2 years using financing from any mortgage lender you choose. When you purchase the property, you always know the buy back price, so there are know surprises and you know what you’re working towards.

Where is rent-to-own available in Australia?

Rent to own is available across Australia, but there are some nuances. Each state and territory has their own laws and regulations about housing policy - so much like purchasing a home in different states, models like Rent-to-Own work differently too. 

In Queensland

  • Rent-to-own is available across Queensland and the Sunshine state.
  • OwnHome has had over 3000 applications from Queenslanders looking to become homeowners in the sunshine state. Customers have bought homes in QLD and Brisbane, including suburbs such as Albany Creek, Pacific Pines, Robina, Pimpama, Eatons Hill, Ferny Hills and Varsity Lakes.
  • Queenslanders pay some of the highest rental yields in the country, meaning the decision to rent vs buy is particularly important.
  • Many rent-to-own providers in Queensland are available for new developments only.
  • Not all rent-to-buy providers are the same—many don’t cover stamp duty, legal fees, for example.

In New South Wales

  • Rent-to-Own is available across NSW. 
  • OwnHome has purchased dozens of properties in NSW purchasing properties for future homeowners. OwnHome has purchased properties in areas like Bondi, Redfern, Miranda, Randwick, Surry Hills, Kareela and Manly. We have also purchased homes in Newcastle and Wollongong. 
  • As rent in NSW rises rapidly and buying a home becomes more out of reach rent vs buy is an important consideration for local families.

In Western Australia

  • Perth housing values were up 0.2% in July. This made it one of the only states to have a rise in the month. 
  • We are not aware of any rent-to-own providers in WA. 

In Tasmania

  • Hobart’s property prices dipped 1.5% in July 2022. 
  • We are not aware of any rent-to-own providers in Tasmania. 

In the Canberra

  • In Canberra property prices dipped 1.1% in July 2022. 
  • We are not aware of any rent-to-own providers in Canberra. 

In the Northern Territory

  • Property prices in Darwin were up 0.5% in July 2022. 
  • We are not aware of any rent-to-own providers in NT.

In Victoria

  • Melbourne’s property prices dipped 1.5% in July 2022. 
  • You need ministerial approval to operate a rent-to-own model in Victoria. 

In South Australia

  • Property prices in Adelaide were up 0.4% in July 2022. 
  • South Australia is largely following Victoria’s lead on the rent-to-own model. 

Just like a mortgage, you can choose almost any home through rent-to-buy

Some rent-to-buy providers specialise in providing access to new homes, whereas others provide access to existing homes. 

There are benefits and disadvantages to buying off-the-plan, new or existing homes which you’ll need to consider. The important part is to understand which kind of home you’re looking for, and then find a service to match.

New developments: 

Rent-to-buy has historically been associated with new developments, as a way to secure homeowners for new builds. 

The scheme often allows home buyers to purchase homes off-the-plan, without stumping up the typical 20% deposit.

Existing homes:

Homeowners can also use rent-to-buy services to purchase homes for sale on the open market or through private sales. This means that if you’re looking for a terrace, an apartment or an existing Queenslander, there’s no need to compromise on your dream home.

However, there will likely be some guidelines that relate to the characteristics or condition of the home. 

For example, OwnHome requires homes to have a minimum of two bedrooms—it also stipulates that the home can’t be a ‘knock-down’ or require serious renovations to be liveable.

What kind of home can you buy?

Most rent-to-own schemes partner with developers to sell new homes. In this instance, you would pay a portion etc. and buy off the plan.

With OwnHome, you can choose almost any home already on the market.

Buy your home for a guaranteed, pre-set purchase price when the time is right. OwnHome is for between 2 and 7 years

To find out if your suburbs can be serviced by OwnHome, use the free online Buying Power Calculator.

How do I qualify for rent-to-own?

To see your buying power with OwnHome, and discover if you can be serviced, try the free online Buying Power Calculator.

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