Is property crowdfunding the future for investors?

by Miklos Bolza31 Jul 2017
Crowdfunding stands out as the leading alternative option for those seeking to invest in the Australian property market, according to a new study.

Researchers at the University of South Australia looked at individual investor motivation, their appetite for crowdfunding, and the method’s potential as another investment vehicle for those seeking to enter the market.

“There’s a lot of debate about the current state of Australia’s housing market, and its inaccessibility, especially to first-time homebuyers, who lack foundation capital to get their first home,” lead researcher Braam Lowies from the University of SA said.

“As crowdfunding works by pooling capital from a large group of people to purchase a property, both the dollar investment and the risk are spread across multiple players with people able to make investments as small as $1,000.”

This means that those from all demographics can try out property investment with their return being directly proportional to the amount they invested, he said.

The study found that property crowdfunding is a long-term investment strategy offering low to medium risks while yielding low to medium returns. It attracts investors from all demographics but is particularly attractive to those between 55 and 64 years (33% of investors). Only 4% of respondents interested in crowdfunding were younger than 35 years.

“There’s definitely an appetite among older investors for property crowdfunding, but we also know that millennials are using this type of investment vehicle to enter the property market,” said Lowies.

“While there are fewer millennials using crowdfunding for property investment, those that do, tend to invest greater funds than their older counterparts.

“In contrast, older investors make up a greater percentage of the property crowdfunding market, but they tend to diversify their investment portfolios, preferring to hold higher percentages of their portfolios in cash and cash equivalent investment vehicles.”

Australia is the second largest participant in the Asia-Pacific alternative finance market behind Japan, Lowies said.

“This strong regional growth is a good indicator that we could expect similar growth patterns in property crowdfunding as alternative investment vehicle in the near future.

“Property crowdfunding is still in its infancy in Australia, but as more people become aware and accepting of new digitalised investment platforms, we’re likely to see this market expand.”

The results of the University of SA’s research have been published in the Property Crowdfunding Australian Investor Perspectives 2016/17 report and were developed in partnership with property crowdfunding platform Domacom.

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