Downsizer app which uses owner equity to buy off the plan raises $3.5m in seed funding

A start-up using equity in homes to purchase penthouses and luxury apartments had raised $3.75m to capitalise on the growing downsizing trend.

A property start-up which buys for and sells the homes of people wanting to downsize has raised $3.75m in a seed round.

Downsizer, a Sydney based start-up co-founded by Mark Macduffie, Damian Morgan and Michael Kelly in March last year, uses equity in a buyer’s existing home to purchase off-the-plan apartments and penthouses on their behalf.

The start-up said it was finding ground among homeowners who were strapped for cash but had mountains of equity within their home.

Data from Digital Finance Analytics in 2021 found about 1.7 million homeowners were considering downsizing their property and 67 per cent wanted to do so within two years.

On its platform, Downsizer has more than 900 customers registered who represent $1.7bn worth of property, Mr Macduffie said.

There’s more than $1bn worth of properties available for purchase on the platform which include a number of properties from Sammut Group, Helm Properties, Griffin Group, Lucent, Kincrest and Top Spring.

Sammut Group's new development on the Gold Coast.

Sammut Group’s Coast GC development, a 36-level tower comprising 43 apartments with resort-style amenities, function rooms and a wellness centre across from Gold Coast Beach, is there, as is Helm Properties’ Eleve, a boutique development of 22 two-bedroom and three-bedroom apartments in Sydney’s Cremorne.

Downsizer’s business model uses bonds underwritten by Deposit Power. Equity in a customer’s existing home secures a bond to use as the deposit on the new property. Downsizer makes a commission from the developer who pays the bond fee, as well as a commission once it sells the customer’s upsized property.

Helm Properties' Sydney development at Cremorne.

The $3.75m seed raise was led by Correlation Australia Holdings, an affiliate of Lombard insurance group from Australia, Europe and South Africa.

Previous investors also participated in the round, which brings Downsizer’s total funding to $6.1m.

While the average sale price of homes on the platform is $2m, some homes have sold for as much as $14m. The properties available to customers range from $450,000 to $9.6m.

The platform facilitated one sale to a Sydney couple whose $14m net worth allowed them to buy an $8.1m penthouse at Coast GC and another penthouse for $4.1m.

Sammut Group's new development on the Gold Coast.,

Of the 1.72 million homeowners considering moving to a smaller property over the next five years, 84 per cent are aged 60 or older.

About 67 per cent of those want to do so within the next two years, while 42.7 per cent are prepared to spend between $1m and $2m on their next property.

Downsizing has been a hot topic in Australia for several months after the federal government announced changes in the 2022 budget allowing a non-concessional superannuation contribution of $300,000 from the proceeds of selling their home.

The contribution was open to both partners who are in a relationship under a move federal Treasurer Jim Chalmers said would help free up housing stock.

Mr Macduffie said many buyers walked out of showrooms after being told to sell before they buy.

“We know that a big attraction for downsizers is reducing home maintenance and chores, upsizing luxury and convenience, and releasing equity to top up retirement income. At the same time, a big barrier is funding a cash deposit,” he said.

Helm Properties' Sydney development in Cremorne.

“Downsizer.com was therefore born to solve this practical issue by connecting asset-rich, cash-poor people who want to downsize with property developers, using its unique technology platform and the Downsizer Bond.”

Downsizer has $22m worth of transactions waiting to be settled.

The start-up will consider advertising and subscription services to its platform as it grows.