If the property is pre-existing, PublicSquare will help you negotiate the initial home value with the owner.
Suppose the property you have selected is brand new or yet to be settled. In that case, the initial home value will usually be the same as the price that PublicSquare or the participating owner has agreed to buy it for on your behalf.
If the property is being bought off the plan, and the contract price was agreed to by PublicSquare or the participating owner some months ago, it may be reasonable to expect a slight price increase when signing your lease. However, it is also our prerogative to advise the owner to match the starting home value to their purchase price on the basis that they are already receiving a good deal.
Wherever relevant, we will make sure you get an independent valuation report to help you make an informed decision about the initial home value. And, ultimately, you will always get the final say on whether you agree with the price and want to proceed.
After 4 years of leasing the property and before 7 years, when it’s time to complete your purchase, an independent valuer will assess the property value according to the prevailing market conditions. As the Homebuyer you will be responsible for paying the price of this valuation, which normally ranges from around $800-$1800 depending on your region and may be payable in instalments.
The final purchase price will be the valuer's price, or the Initial Home Value plus 5% annual capital appreciation, whichever is higher.
If either party disagrees with the valuation, there will be options under the lease for ordering a second opinion and taking the average of the two. In this case, the party that disagrees will pay for the second valuation.
For reference, Australia's national average is **6.8% for houses** and 5.9% for apartments (CoreLogic, 1993-2018). However, it could be higher or lower during your lease.
If you're worried about the growth of your property dipping under 5% per year during your lease, just remember that you control when you purchase the property within a 4-7-year timeframe, so you can keep an eye on housing prices and exercise your option when it makes sense to you.
Regardless of whether you're renting-to-own or obtaining a traditional mortgage, fluctuating property prices is a risk you should carefully consider. For a complete picture of the costs involved with PublicSquare, we recommend checking out our Calculator