Share by share: Crowdfunding offers new opportunities for Australian property investors

 

Forget securing bank loans, costly mortgages and stressful auctions — investors could make their way into the increasingly challenging Australian property market through crowdfunding, according to new research.

A study from the University of South Australia has suggested crowdfunding could be a new vehicle for investors trying to make headway into the property market.

The study, which aimed to investigate investor perceptions of property crowdfunding, was conducted in partnership with DomaCom, one of the largest property crowdfunding platforms in Australia.

University of South Australia lead researcher Braam Lowies said while the concept was relatively new in Australia, it had been successful in the United Kingdom and United States for about seven years.

Results from the study showed crowdfunding was proving an attractive alternative investment option for people of all ages, but particularly for older investors.

Young investors not on board yet

A survey conducted as part of the study showed crowdfunding attracted a mix of investor types, with older Australians aged between 55 and 64 representing 33 per cent of investors, the largest cohort in the study.

Only 4 per cent of survey respondents were younger than 35, despite crowdfunding platforms' aims.

"If you speak to the crowdfunding platforms involved [in the study], the goal was to get younger people involved in property investment because of all the difficulties they do have these days to invest in property," Dr Lowies said.

The habits of buyers involved in crowdfunding varied greatly and were dependent on their age.

"Younger people do actually invest higher amounts of money, where older people will rather invest smaller amounts," Dr Lowies said.

"Higher amounts of their investment portfolio will be in cash and cash equivalents given the later stage of their lives."

How does property crowdfunding work?

Property crowdfunding involves investors using digital platforms to invest in the purchase price of a property, with people able to invest as little as $1,000.

The property is sold once the sale price is reached by any given number of investors.

The seller receives income from the sale of the property 'shares', while buyers receive dividends and capital growth based on their level of investment.

In contrast to a traditional property purchase, there is no peer-to-peer lending or debt structure associated with the investment, which Dr Lowies argued made the concept more accessible to more investors.

The research found crowdfunding offered low to medium financial risk and similar levels of return.

Crowdfunding investment opportunities in Australia

Opportunities to purchase properties through crowdfunding platforms in Australia are currently limited to residential and rural properties.

The study found a particularly high interest in rural investment, something Dr Lowies attributed to DomaCom's high-profile campaign to fund the purchase of Kidman Station in 2016.

With property crowdfunding a new concept in Australia, Dr Lowies said the next step to further develop it in Australia centred around regulation.

"At this stage the regulation around property crowdfunding is still a bit of a grey area," he said.

"If you buy your crowdfunding share and you want to sell it, there should be a market for you to be able to sell that, because it is a financial instrument.

"There is no secondary marketplace currently to trade your crowdfunding share in. That is the next step."

Despite admitting he had no crystal ball, Dr Lowies said the research offered promising signs for the longevity of the property crowdfunding model in Australia.

"If I look at the rapid growth of crowdfunding as a concept and then real estate crowdfunding within that as a concept, and the global growth which it has shown, I do think there is a very good opportunity for Australia to mimic that growth and for the industry to become a very strong industry," he said.

"It's a shopping-at-my-desk world that we are moving towards and why not?

"Why not have the opportunity to sit at your desk, to view photographs of a property and to shop online?"

Original Source:  http://www.abc.net.au/news/2017-08-03/crowdfunding-offers-new-opportunities-for-property-investors/8770476