While crowdfunding is not a new investment platform for the worldwide real estate market it will certainly have a greater influence in the future. This week has brought news of yet another crowdfunding company looking to hit the real estate market with Australia the target. The Australian real estate market has been very buoyant of late and while the majority of activity is based upon a small selection of the overall market, crowdfunding could push prices even higher.
It seems every month, with striking similarities to the London property market, that the likes of the Sydney real estate market attracts negative headlines. Expert after expert has predicted a significant fall in prices, some going as far as to suggest they will crash, only for investors to ignore this and continue pumping money into the market.
Why is crowdfunding so popular?
Crowdfunding is effectively shared ownership of an investment asset which the majority of investors would have no chance of owning outright. It gives the ability to gain exposure to markets around the world with a relatively small outlay. There is also the fact that crowdfunding tends to cut out the banking industry which has itself attracted a whole flurry of negative comments since the 2008 US mortgage crisis.
Is crowdfunding safe?
Before we look at the relative safety of crowdfunding investments it is worth noting that no investment in the world is 100% safe. This is the whole point of investing because there is the risk/reward ratio and the key to successful investment returns is based upon your future interpretation of this.
Even though crowdfunding has been around for some time it is still in its relative infancy and developing. There is no doubt that regulations will get tighter as its popularity increases, there will be more safeguards for investors and the overall quality of companies looking for investment will rise. This is something which the Austrian authorities have mentioned this week, the need to ensure that all companies looking for crowdfunding investment are “top-quality”.
The banking community
Aside from the general comments regarding the Australian real estate market, and the future involvement of crowdfunding, there were some interesting observations about the worldwide banking community. There is a growing belief, among some experts, that the banking community will take a leading role in crowdfunding projects in the future with a suggestion that some banks will actually acquire crowdfunding companies.
There are obvious pros and cons regarding the banking institutions getting involved in crowdfunding but there is no doubt that it is beginning to disrupt the historic banking community markets. There is also no doubt that the banks will not sit back and let the “new kid on the block” take a large chunk of their business!
Crowdfunding is in simple terms a form of shared investment and what better market to focus upon than the real estate sector. The future focus on the Australian market is interesting for a number of reasons one of which is the ongoing rise in the value of properties in the Sydney market as an example. Will crowdfunding push prices further and further away from first-time buyers? Will the affordability factor be impacted as much as critics suggest?