- Introducing Marshall King
- Fintech and Proptech | The Future of Property Investment
- How has Property Crowdfunding Changed Over the Last 5 Years?
- Property Crowdfunding and the Recent Changes in Tax on Buy-to-Let
- What does Property Partner have Planned for 2019?
- What Will Buying a Property Look Like in 10 Years Time?
How Property Crowdfunding has Developed
Rob: Today, we are going to be looking at how property crowdfunding has changed over the last five years. It is a relatively new marketplace, in general. And in a short space of time, let’s say, over the last five years, Marshall, I appreciate there will have been a whole raft of changes, both within the properties that yourselves and other platforms might be looking at. And then also, regulation and other things that might have helped to make the market more mature and get to this stage.
So, how have you seen it develop over the last couple of years, with property crowdfunding?
Marshall: I think crowdfunding, in general, has developed, massively, over the last five years. Some of the very early crowdfunding sites were in charity areas or related areas.
I think financial services and property businesses have understood that it could really bring benefits, the ability to bring people together in crowdfunded investment vehicles.
Crowdfunding is Going More Mainstream
Marshall: Some of the early ventures, I think, were feeling their way. Now, the industry is maturing quite a lot. So, in the case of Property Partner, for example, we are regulated by the FCA. We do a lot of work with them. And that regulation is getting more-and-more strict. And I think it should be because obviously, as we build the crowdfunding sector, people need to have confidence that the businesses invest in are well run.
The bigger companies, now, are becoming really quite substantial, both property-backed debt and property equity.
And the next thing, that we are seeing, is that the clients that come on board are not just the early adopters. It is more mainstream and we expect that to build. I think in the general lifecycle or development of property crowdfunding, we are still at quite an early stage. So, we are measuring our investments in the hundreds of millions rather than the billions as buy-to-let, for example, is still measured.
The Secondary Market
There is a long way to go but we are maturing as a segment and as a business and the other thing, that’s now arrived, at least, in our case and in some other cases, is that we have secondary markets running. And that gives a whole new optionality on property investing because, for the first time, property investment is not a very long-term, illiquid investment. You can buy property shares on a crowdfunding site and then trade them, which gives the option to adjust your position, in terms of what you think about how the market will develop or you can exit and invest in other areas.
That is new and that is very powerful, in terms of investors coming into the market because they see that liquidity that has not been there before.
Rob: We get so many questions from investors who love property, who love the idea of it, the nature of it, who always compare it to other investments they have or other businesses that they are associated with, who are worried that it is, historically, a relatively illiquid option.
It takes time to buy and sell a property. It takes time to rent a property. It takes time to refurbish a property. There are all of these things and never an instant transaction.
So, we certainly get positive feedback, generally, when things within the property technology space come about, where it speeds up different elements and makes things more efficient.
I think that is where the secondary market, certainly, from my side, looks quite exciting because it gives an element of liquidity that has never been there, historically.
Marshall: That’s right. And we do get a lot of trading on the secondary market. So, it’s quite actively used, not only for people who want an exit position but moreover, new investors come in and find that they can acquire shares in an already purchased and operating property with tenants, producing income and right away they can go from investing to having an income, instantly.
Trust and Diversity
Marshall: And that’s something that’s never been possible in property before. And we think, that eventually, that will become the de facto way of investing in property. It is so powerful a proposition, compared to doing it yourself, that it really makes a lot of sense.
Rob: So, this is obviously a regulation key point, the confidence that we have seen has increased over the years with property crowdfunding. Things like the secondary markets, access to new opportunities, which we have touched on in other videos with Rob, commercial opportunities, purpose-built student accommodation. So, there is a range of different opportunities out there, now, rather than just your mainstream, vanilla buy-to-let opportunities that an investor might have invested in, historically.
Marshall: That is a really good point. At Properly Partner, we are looking very carefully at different property strategies, to build assets and offers for people who are interested in different financial characteristics. Maybe they want a strong income from their investment, maybe they are looking for capital growth. Maybe they’re looking for a very high return, based on investing in properties that are under development.
So, through the crowdfunding operation, it is possible to access to these different types of strategies and through the secondary market, you can adjust your exposure, with these different strategies.
Property investing can become something that is much more strategic, in terms of how you build a portfolio of investments, both within property and outside of property to develop and maintain your wealth position.
Rob: Fantastic. So, nice growth over the last couple of years and hopefully some nice, future opportunities as well, which we will touch on in some future videos. Thank you very much.