Lead researcher, UniSA’s Dr Braam Lowies, says the groundbreaking study assesses individual investor motivation and appetite for crowdfunding and its potential as an alternative investment vehicle for entering Australia’s tenuous property market.
“There’s a lot of debate about the current state of Australia’s housing market, and its inaccessibility, especially first-time homebuyers, who lack foundation capital get their first home,” Dr Lowies says.
“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 people of all means and ages can try their hand at property investment, with their return being directly proportionate to their level of investment.”
The research conducted by UniSA shows that property crowdfunding is a long-term investment strategy offering low to medium risks, and yielding similar low to medium returns. It attracts a mix of investor types, but has particular appeal to older Australians aged between 55 and 64 years (33 per cent of investors, representing the largest cohort). Only 4 per cent of the respondents 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,” says Dr 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.”
Property crowdfunding forms part of the online alternative finance market which has shown exponential growth over the past few years. According to the Cambridge Centre for Alternative Finance the Asia-Pacific Region alone (excluding mainland China) has shown a 313 per cent increase to a volume of USD $1.2 billion in 2015 from USD $271.94 raised in 2014.
“Australia is second only to Japan as a participant in the Asia-Pacific alternative finance market,” Dr Lowies says.
“This strong regional growth is a good indicator that we could expect similar growth patterns in property crowdfunding as an 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.
“It is an investment strategy that has the potential to revolutionise the property market.”
The results of this research are published in the Property Crowdfunding Australian Investor Perspectives 2016/17 report, developed in partnership with Domacom, one of the largest property crowdfunding platforms in Australia.
