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August 04, 2015
The Sharing Economy is a buzz phrase that has garnered attention over the last few years of many a disgruntled consumer. Fed up with being dictated to by the likes of banks, economists, global hotel chains, taxi companies and other corporations, consumers are flocking to many emerging rivals of the traditional business models.
The term 'sharing economy' began to appear in the mid 2000s as business structures morphed or emerged under the auspices of new technology. With depleting resources, incompetent governments and general discontent in the world, people began to connect through the rapidly growing popular social media and the germination of a movement took root and began to flourish.
The essence of this movement lies in the notion that people power can change fundamental business structures in a society and alter a collective mindset.
It is a socio-economic system built around the sharing of human resources and often referred to as the 'disruptive economy'. This economy covers an extensive and ever growing list of services, goods, shared creations and production.
Technology has made the 'sharing' aspect of this economy a reality and has accelerated its growth with a snowballing effect. It has facilitated the spread of sentiment of a consumer base increasingly unhappy at the way things are done to favour the few at the cost of many.
Sharing economies makes it possible to engage with peers, to cut through red tape and to get things done utilising resources that exist and are available to share or exchange.
Some examples of sharing are:
• Air BnB. No longer reliant on hotels, Air BnB makes it possible to share someone's house whilst on holiday with the obvious benefits of cheaper rates and local knowledge.
• Couch Surfing, same concept but free.
• Uber, car taxi. People making themselves available to help passengers commute and so it goes with the list growing by the day.
Possibly the most significant of all disruptive movements is the peer to peer lending. This phenomenon has gained momentum with impressive speed. With sites such as Society One that allows people to borrow from other people who aggregate funds to form a pool of available money. So significant is this site that James Packer and Westpac have taken a stake in it.
This has the banks concerned as trends, if successful, become entrenched as long term practice and a new way of doing business. It may have serious ramifications for traditional lenders and certainly stimulate competition in the sector.
Other Collaborative Sites:
Fashion: Girl Meets Dress
Skill Share: Task Rabbit, Zaarly, Air Tasker
Crowdfunding: Kickstarter, Indiego, Pozible
Housing: Home Addressed
In October 2012 Girl Meets Dresses was featured in a report produced by Zipcar called 'Pay As You Live', the business of sharing the UK. It revealed that this new pay as you live lifestyle is changing the retail paradigm with a market in the UK estimated at £22.4 billion pounds.
Reasons why consumers turn to hiring vs buying:
• Cost per use = 60%
• Not being able to afford to buy it = 53%
• Depreciation in value = 30%
• Ongoing maintenance costs = 45%
• Flexible to upgrade and change styles = 29%
More than one third of Britons embrace the sharing economy. source: peoplewhoshare.com
The sharing economy is estimated to be worth $500 billion globally and growing.
In Australia, a Deloitte report estimates the collaborative economy is worth $46 billion.
Some of the attractive features of this movement are flexibility and adaptability. For example, Air BnB partnered up with the Victorian government to offer low short stay low cost accommodation to all victims of flood and fire.
US and UK market places are typically two years ahead of Australia (Rachel Bostman author of What's Mine Is Yours.)
Peer to peer lending is proving to be a highly successful innovation in lending practice. According to the Herald Sun newspaper 22/2/15 people are leaving banks because of 'dud deals and service’. Those seeking money are paying 4% less than they would on a traditional loan. Those investing have the opportunity to make 5% more than standard term deposit rates.
Perhaps the most significant question of all relates to housing. How do we make housing more affordable? How do we as a society tackle the ever increasing breach between those who are able to afford to buy a house and those who are completely shut out of the property market and destined to rent? The lack of affordable housing is a highly contentious issue worldwide no less in Australia where the problem of affordable housing is shuffled from politician to politician and then conveniently placed in the too hard basket. It has become apparent that we cannot leave our fate in the hands of politicians who are seemingly at a loss when it comes to addressing critical issues faced by our society. A lack of vision coupled with a lack of commitment, make for a dangerous and highly impactful combination.
What efforts have been made in the direction of collaborative housing i.e. home co-ownership or fractional ownership? Perhaps there are still too many taboos focused on this are, however, the notion of investing so much money with a sibling, friend or partner is gathering momentum as the stark reality takes hold that this may be the only way that many will have of owning a property.
Buying a house with someone can be the best collaborative move you will ever make. Firstly, it means that you create the opportunity of owning instead of being stuck in a rental cycle. Secondly, it means you can buy much faster because you are splitting the deposit and all household costs. Thirdly it does not have to be a lifetime commitment. The equity gain is what you would to leverage another purchase or realise a sale and use the profits as a deposit for each party.
Bear in mind that home co-ownership is a powerful vehicle and needs to be viewed as a business proposition. Essential to this way of buying, is a co-ownership contract.
Before entering into this arrangement, you need an exit plan and considered thought to the 'what if' scenarios eg what if one of us loses his/her job; what if one us wants to pull out...etc.?
A contract covers the major concerns and a day to day agreement is known as a co-habitation agreement. These two documents will forge the path towards a successful collaborative partnership.
Co-ownership is becoming a popular option with more and more young people taking the plunge into the property market. The shifting dynamic is seeing first time buyers teaming up to buy investment properties. They do this with siblings and friends but sometimes they prefer to enter into this type of transaction with acquaintances. It is tempting to enter into collaboration with people we know and ignore all the precautions...no contract, contemplation of changing circumstances and no exit strategy, however, when we buy with an acquaintance we tend to regard the transaction with greater due diligence. We want to know that our interests are protected and that's a great thing!
How do you find a buying partner or an investor? Where to start? What collaborative sites are there to accommodate this type of sharing?
Home Addressed (www.homeaddressed.com.au) is one such site where users can search profiles and find a partner with whom to buy. The site has losts of information and videos about co- buying and it even has specialised co-ownership contracts for sale.
Explained are the terms Tenants in Common and joint ownership, intrinsic to co-ownership of property. In a world that is inching its way into collaboration, home co-ownership has its place firmly etched in this brave new world.
Consumers are looking for a different way of coping with an increasingly rising cost of living and simply a more creative and effective way of doing business.
Long live people power!
Owner of Home Addressed