Real estate crowdfunding has been growing more and more over the last couple of years, as it was also shown by our latest Crowd Valley Market Reports. This type of crowdfunding, which bases its roots in the US market, where the first dedicated portals started their activities, has increased by double between the years 2012-2013 and by the end of this year it is expected to double again.
But real estate crowdfunding is not doing well just in the US. In the UAE, for example, this innovation for the real estate sector has found a fertile ground, with more than 30 operative platforms and nearly US$5.1 billion raised in 2013, up 81% from the previous year, according to a survey. Other interesting markets are the UK and South East Asia, where one of the first incumbent is a company part of GrowVC group.
But why is crowdinvesting currently booming? One of the main reasons is that the types of investments offered, which are quite various, ranging from renovations to distressed debt, usually carry high annualized returns – 10 percent to 30 percent – during three to five years investment’s life. This certainly makes real estate crowdinvesting very appealing to many investors, who did not have access to these kind of deals until a couple of years ago. In fact – and this is another reason behind the success of this new market – crowdinvesting brings an important innovation in a sector which has remained unchallenged for many decades: it enables everyone to potentially participate in a real estate deal, which traditionally have been open only to those investors who had the right connections and relationships with property developers. Furthermore, it allows the industry players to eliminate the big inefficiencies that have characterized their businesses for a long time, reducing their high overheads and disintermediating the investment process. Thanks to the online technology, incumbents can also easily expand their demand and supply of real estate investments cross-borders and increase the overall transparency level.
All these reasons, summed to the fact that real estate investing is a more familiar concept to non professional investors than startup investing, contribute to the current huge success of this new application of crowdfunding.
Irene Tordera (Crowd Valley)