Real estate crowdfunding has climbed from $1.01bn in 2014 and is expected to raise a further $2.57bn in 2015, according to a report by Massolution. Low interest rates have made bond investments less attractive and led yield-seeking investors to crowdfunding as a way to finance their homes, or profit from commercial real estate ventures.
Technology opens the investment opportunity to more participants
Crowdfunding involves raising large amounts of money through small contributions and can help first-time buyers as an alternative method to a mortgage. There are currently 82 real estate crowdfunding platforms in operation and the emerging industry is growing at an exponential rate with speed and diversity pitting it above REITs. According to the report, technology opens the investment opportunity to more participants, while allowing activities to be conducted in an efficient way.
There is significant potential for residential crowdfunding platforms across Asia, where firms contributed $21.3m, as well as in Africa, Oceania and Latin America which contributed less than $10m to 2014’s funds. In comparison 97 percent of these funds were raised in Europe and North America with the latter raising $565m, more than doubling their 2013 total.
In the report, Massolution said: “Real estate, in a rebound over the last five years, has become a much-sought-after asset class, largely due to the search for higher current income, shadowing a growing weariness of high-valued stocks and anaemic fixed-income offerings. Residential crowdfunding has the breakout potential, as mortgage loan origination, a trillion dollar market, is opening up to distributed platform financing.”