Industry Insights

With UK house prices forecast to grow, property crowdfunding is an attractive option for many new investors

Last month, Savills released their annual Residential Property Forecasts, detailing a five year forecast for the UK's residential property market. Unsurprisingly for most, the forecasts show increases right throughout the country.

Predicting a near 15% growth across the country as a whole, interestingly, the London-dominant trend of recent years is expected to be bucked.

In fact, London's prices are anticipated to rise just 4.5% over the coming five year period, whilst the North East should expect to see a 17.6% rise, and the North West and Yorkshire over 20%.

Clearly showing that the benefits to being involved in the UK residential property market continue to exist - property has long been a favourable investment asset due to the almost continuous rise in property prices - it's likely we'll see more and more interest in the asset over the coming years.

With many experienced investors already involved in the market, some have had a stake in it for decades, and have reaped the rewards as a result. And for those experienced investors who aren't involved, it's likely they're aware of the benefits, but have a set reason as to why they haven't added the asset to their portfolio.

For new investors, however, it's fully appreciated that traditionally, entering the property market was something that required a considerable about of capital and/or expert knowledge. This instantly made it a particularly difficult asset to invest into, be that directly by buying a house or indirectly through funds, for instance.

But with the emergence of property crowdfunding in recent years - and its huge rise in popularity lately - it has offered a route into property that is arguably the most accessible of all the available routes.

An opportunity for every property investor

As a form of crowdfunding, the fundamental principle of property crowdfunding is exactly the same - a number of parties come together to invest into a signal opportunity.

To date this has most commonly been with startups, and property crowdfunding simply swaps out the startup with a property development project. The investors still come together to invest into one opportunity, and rather than taking a stake in a startup, they're generally taking a stake in a Special Purpose Vehicle (SPV), a limited company setup to fund the specific property development in question.

Read more: what is a Special Purpose Vehicle (SPV)?

Given that the 'crowd' is coming together to fund the project, minimum investment amounts are often considerably lower than other routes into property. Here at GrowthFunders, for example, our minimum investment limit into our joint venture property investment opportunities is just £1,000.

In comparison, if you were buying a property directly to rent out and were going down the mortgage route, for example, you might need a 25% deposit. Assuming a relatively modest house price of £100,000, that's £20,000.

What's more, investing this into one property obviously gives you full control over every aspect, including 100% of the returns - but it also means that that full £20,000 is tied up with one asset. If that's your investment budget reached, you have no diversification - invest it into 20 property crowdfunding opportunities, however, and you can instantly have a diverse portfolio of properties.

And with differing risk levels and return periods, property crowdfunding has opened up the asset class considerably. It's arguably become more accessible with fewer hurdles to encounter than we've ever seen before.

Is it the right option?

But just because property crowdfunding has seen a distinct increase in popularity and in many ways has simplified the process to becoming a property investor, investors always need to question whether it's the most suitable route for them.

As highlighted above, experienced investors will be aware of property and many who haven't invested already will have a specific reason for not doing so. The most successful investors have portfolios built around their specific financial requirements - in the short, medium and long term, and with clear levels of risk preferences - and property simply may not fit into it.

Read more: how to get involved in property investing through crowdfunding

And property crowdfunding offers a brilliant opportunity for new investors to dip their toe into the property market without a need to invest large sums of money in comparison to other routes.

Investing alongside other investors - which can also include corporate investors, institutions and even the housebuilders themselves - also brings with it the ability to have increased levels of confidence in an opportunity.

Yes, it's critical you always carry out your own due diligence and you have to feel fully confident that the opportunity is right for you, but seeing other experienced investors partaking in the opportunity can go a long way to bolstering your confidence levels.

Property crowdfunding for new investors

The data presented by Savills showing the forecasted figures for the UK's residential property market over the coming five years is undoubtedly a positive for anyone involved, or looking to be involved, in the sector.

There are numerous routes to entry, with options for every investor, almost regardless of requirements, but we can't get away from the fact property crowdfunding has entered the market in recent years as arguably the most accessible.

Opening up property investment to the masses, for those new investors looking to get involved in property over the coming years, it's hard to imagine most won't at the very least explore the huge potential of property crowdfunding.

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Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.