Shared equity open for business

Also yesterday we saw the release of another shared-equity style home loan product. This one is offered by the Macquarie-backed Rismark via Adelaide Bank. From an investment perspective I like these ideas because I think they have the potential to open up a new frontier (how exciting!). St George and Australand also announced a variation that splits the mortgage between two titles.

I have never seriously considered investing in property mostly because I don’t want to deal with tenants and the transaction costs really scare me off even with tax benefits and the excellent returns that have been generated. Not to mention the enormous punt you are taking on your ability to pick a half-decent property.

Obviously this mindset has cost me a mountain of money in the past five or six years (add that to the behavioural finance list of problems). So I think the prospect of property market indices and a related derivatives market is enticing. I’m assuming you could leverage up at the same ratios you would for standard property. There’s no reason why you shouldn’t be able to, particularly if you can spread your risk across different cities. I guess you miss out on rental income as there doesn’t seem to be an imputed rent attached but you should be able to still gain tax benefits.

Back to the share market, and one company front of the queue to benefit is RP Data. They are involved with Rismark and the property derivatives market. RPX were listed by way of a sell down by Macquarie and another shareholder at $1.25 last year. Currently the share price is around $1.83 and the growth that’s priced in doesn’t appear overly excessive for a company that might just be at the cutting edge of a new market. Property price information is an area where I think there are large barriers to entry – gathering the information and expertise, quality etc – while complimentary innovations such as Google Earth help to add value to their services (have a look at propertyguru.com.au for what I’m talking about).