"How to buy with others' money"
The Australian
March 11, 2006

THE costs of home ownership could be cut by 20 per cent under the terms of a radical zero-interest "equity finance loan" to be launched through major lenders from July. The idea for the loans arose in work carried out for Prime Minister John Howard's 2003 Home Ownership Task Force. Christopher Joye, who led the taskforce, now works as an executive director with Rismark, which has patents on the equity finance mortgage (EFM). For first home buyers who can't afford to buy a property and want to reduce upfront costs by 20 per cent (lesser or deposit, nil mortgage insurance, nil interest) the attractions are obvious. The product will also appeal to an ambitious, aspirational market which wants to buy a home 25 per cent more expensive than they otherwise could afford "It allows people the option of upgrading to a nicer, more expensive suburb -- if, for example, they wanted to be nearer their child's school," says InfoChoice general manager Denis Orrock. "Equity finance mortgages give asset-rich, income-poor retirees who want to access an equity release mechanism a safer option than a reverse mortgage," says Rismark executive chairman Richard Facioni. "In contrast to reverse mortgages, EFMs will always leave retiree borrowers with at least 60 per cent of the net equity in their home, irrespective of how high interest rates are, how fast property prices grow, or how long they live in their home."

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"Backing the burbs"
Sydney Morning Herald - Simon Hoyle
November 5, 2005

Australia's owner-occupied residential property market is worth an estimated $2800 billion but until now it's been an investment market all but closed to institutional investors. If institutional investors, including superannuation funds, wanted to invest in owner-occupied residential property, they had to do it indirectly. They could assemble portfolios of residential properties and rent them out, but tenanted property is not quite the same thing as owner-occupied property. They could lend money to people to buy a home, but mortgages are fixed-interest securities, and there's no way a mortgage lender can participate in the capital gain on an owner-occupied property. Investing in property developers and builders is, likewise, a derivative exposure. So investors in superannuation funds, while they might own their own homes already, have been missing out on an important source of potential capital growth and an asset class that could help diversify their retirement saving portfolios and hence reduce risk. A solution to the problem has emerged from an unlikely quarter: the 2003 Prime Minister's Home Ownership Task Force. Christopher Joye, who led the task force and produced a 378-page report on the subject, came to the conclusion that something was needed to bridge the gap between a ready source of funds - capital markets - and home owners. Joye's company, Rismark International, has established a joint venture with Macquarie Bank to source funds from capital markets and package them into a product that can be sold to home buyers. The Rismark team includes, among others, Richard Facioni, a former executive director of Macquarie Bank, Russell Aboud, a director of the Australian Stock Exchange and chairman of Ord Minnett, Sandra Donnarumma, previously the chief operating officer of InTech, Glen Bertram, a former UBS executive, and John McGee, a mortgage market expert. The vehicle Rismark and Macquarie have put together is the typographically tricky ARES fund: Advanced Real Estate Solutions fund. The fund intends to raise $1 billion from institutional investors, which it will then package up and provide to home buyers as EFMs.

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"A house divided stands OK"
The Australian - Christopher Joye
July 23, 2003

ON June 6 this year, I delivered a 378-page report to Prime Minister John Howard that advocated a variety of demand and supply-side approaches to radically reducing the costs of home ownership in Australia. At the heart of that effort lay the belief that it is time capitalism developed a more human face. For centuries now, businesses in need of funds have had access to both debt and equity. Yet for households wanting to expand, mortgage finance has been their only alternative. In an attempt to rectify the asymmetry between corporate and consumer capital markets, we recommended offering Australian families the option of using both debt and equity finance when purchasing their properties. In this way, aspirants could fund their housing needs with both a mortgage and a passive institutional partner which contributes equity (via a synthetic debt contract) to the dwelling in exchange for a claim on the prospective price movements, with no other monetary payments made between them. Importantly, occupiers would retain virtually all of the decision-making rights free and unencumbered, just as in traditional markets.

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