30% of Property Partner’s investors are 30 or under, while the average landlord is 56 years old.
In the past, the real estate market was widely known to have high barriers to entry that impeded low-income individuals – typically young people – in making investments. The two main barriers that prevent young people from buying a house are the size of the deposit (57%) and high property prices (56%), according to the Halifax 2015 “Generation Rent” report. Today, Property Partner, a UK real estate crowdfunding platform, is tackling those problems, by allowing almost anybody to purchase a stake in a property.
Property Partner claims that even people as young as 18 are using its innovative technology to buy and sell shares in residential property and that approximately 30.4 percent of investors are 30 years or under, while the average landlord in the UK is 56 years old. The company boasts more than 4,800 investors, who have collectively crowdfunded £13.8 million of residential property. What is remarkable is that 63 percent of them have invested less than £500, an amount significantly less than the traditional upfront costs required in this market.
Indeed, the platform’s minimum investment in a single property is £50, while the maximum is £50.000, with a one-off 2% fee and no annual charge. All properties are organised into different investment themes to make it easier for users to choose. People will earn income from rent each month and the amount will be in proportion with how much of the property in question a given investor owns. According to the platform, investors receive an average annualised return on investment of 13 per cent.
The platform offers also users two possibilities of exit from their investments: the ‘resale’ market and the 5-yearly exit protection. The former consists of selling holdings to other investors on the market. Users might decide the price and which portion of investment they would like to sell. The latter allows users to sell investments at their market value. Valuations are made by independent chartered surveyors, but this path is only viable every 5 years. Neither option entails exit costs: users will benefit from all the proceeds.
“This technology is revolutionising a previously exclusive asset class. Our innovation means these young, tech savvy investors are now able to invest their savings and keep up with rising property prices. It’s exciting to see technology shaking up the property sector as it has done for transport, hospitality and retail.”
The platform now seems to be garnering significant traction. Young investors are waking up to the attractiveness of the opportunities that Property Partner is offering. Ben Wakeham, 25 years old, share his opinion of the platform:
“Buying a property is every young person’s primary financial goal but I don’t know anyone my age that actually owns their own home. The idea of owning property used to be totally out of the question but Property Partner allows you to invest even if you’ve just got a small amount of cash. I’ve now got access to good returns on a regular basis, for relatively low risk. I’d say it’s a great way for young people to get closer to their savings goals.”
However, Property Partner also warns its users that their capital could be at risk and that past performance is not a reliable indicator of future performance. The main risks that investors might face are declining value of investments, which might be caused by a fall in the underlying value of a property or a problem with a property that needs to be funded from future rental income; liquidity risks, that may rise if users want to sell their holdings, but all they can do is wait for the next five year anniversary of that property's listing on the Property Partner platform; unexpected exit, as the platform reserves the right to dispose of the property and return net proceeds to investors, which might end in investors receiving back substantially less than they invested.
Property Partner belongs to that group of UK platforms - including the likes of Property Moose, Property Crowd and The House Crowd - that enables the crowds to invest in the real estate market, from youngsters to adults, even if they are not experts of the industry. In my opinion, these platforms are literally opening the property market, so that anyone can own their share in bricks and mortar. And this is a positive thing, another locked door that the powerful world of crowdfunding is helping to open.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.