Making space for crowdfunding in the property market

Shareholders in housebuilders and real estate agents may well struggle to see share price growth in the coming months so now is the time for investors to look at alternative investment options – such as crowdfunding platforms – to generate stable returns from the property market.

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Recent results statements from Persimmon and Bovis Homes show that housebuilders are no longer able to rely on house price growth to drive their returns due to the general slowdown in house prices we are currently seeing.

Many housebuilders have been helped by the government’s ‘Help to Buy’ scheme which lifted the number of first-time buyers snapping up its homes, while also boosting companies that produce new-build properties at a time when the rest of the market is slowing down.

However, in reality, the likes of Persimmon have exploited some very favourable market conditions in recent months and real questions remain over how profitability – and share price performance – will fare when positive drivers such as low interest rates and incentive scheme are removed.

A similar trend is evident with investors ditching shares in estate agent groups – such as Countrywide – following its second profit warning this year, which shows that many buyers are playing a ‘wait and see’ game with prices to see if they can get a better deal in the future.

The Brexit factor, high stamp duty costs and the fact that house prices remain beyond the reach of many buyers are also impacting the decisions of wary retail investors.

This cocktail of factors shows investors looking to make returns from real estate should consider investing in property development through crowdfunding.

Investing in a property development project, which, for example, through propio.com is backed by the property asset itself, is the common-sense way to hedge against market volatility and manage risk in this uncertain environment.

So, how does propio’s platform work? Users log into the platform and allocate money either to specific projects or to a selection of pooled bonds which invest in multiple opportunities.

The platform includes all critical data about every opportunity, complete with independent valuation information and an explanation of the project’s timeline.

Investors get their cash back when loans are repaid or developments are sold, with the duration depending on the type of project and on whether investors have taken a debt or equity stake.

Taking an equity stake in a project – the highest risk option – could potentially earn a return of up to 15-20%.

Debt investments – where money is lent to developers but secured against the asset – typically return around 8%.

propio has been road-tested over the past year by an expert team of developers responsible for more than half a billion pounds worth of property.

At propio we secure exclusive property investment opportunities, which meet our strict 52-point investment criteria, through our extensive network of investment and property contacts.

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