Peer To Peer and Development Performance Stats

December 2016 Summary P2P & Development Stats

December 2016 Summary Monthly Statistics can be seen below.

Bridging Loans   31/12/2016
  Gross Net
Total Amount Lent £10,773,024 £9,624,670
Total Returns Paid £292,637 £292,637
No of Loans 28
No of Loans Repaid 14
Average Loan Period 10
Investors Capital Lost £0
Average Loan Size £384,751 £343,738
Average Loan to Value 70%
Average Interest Rate Paid 9.00%
Average Interest Rate Offered 9.08%

 

Development Loans   31/12/2016
  Gross Net
Total Amount Lent £8,865,861 £8,019,571
Total Returns Paid £46,862 £46,862
No of Loans 12
No of Loans Repaid 2
Average Loan Period 9
Investors Capital Lost £0
Average Loan Size £738,822 £668,298
Average Loan to Value N/A
Average Interest Rate Paid 14.00%
Average Interest Rate Offered 11.92%

You can find all our latest investments by clicking here.

View our Property Investments

Manchester Property Market Growth at 12 Year High

Manchester Property Market Growth at 12 Year High

Latest figures released by the Hometrack Index show Manchester property market growth to have hit a 12 year high in 2016. This gives the city the second highest rate of price growth in the UK, next to Bristol.

A rise of 8.9% year-on-year for Manchester was reported, with experts predicting that the city will overtake Bristol for pole position by the end of the first quarter of 2017. The figures for Manchester exceed the average year-on-year increase across the UK, which came in at 7.7%.

Strong market fundamentals, particularly a significant supply/demand imbalance in Manchester, keep pressure on prices high. Despite the same supply/demand imbalance in the capital however, London dropped to seventh place for price growth in 2016.

Strong Market Fundamentals Keep Manchester Property Market Growth Thriving

Manchester’s vibrant rental market is also thriving, with demand continuing to grow. This, of course, makes it a dream opportunity for buy-to-let investors. Indeed, the city was recently named the UK’s buy-to-let hotspot by HSBC. This is all despite the massive challenges faced by buy-to-let investors following the government’s attacks on landlords.

The growing popularity of property crowdfunding is helping prospective buy-to-let investors push back against these attacks, providing a welcome haven for those keen to benefit from a steady stream of secured rental income.

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Rental growth here is 13 times that of London, driven by the growing population of young renters, flocking to the city for studying and career opportunities. Manchester boasts 60% more 25-29 year olds than the UK average, placing it within the country’s fastest growing demand for short term lets.

Massive Investment In Manchester Fuelling Property Market Growth

Success is also compounded by the government’s whopping £7 billion investment in Manchester. Determination to develop a world-class infrastructure in the city will attract further billions of worldwide investment over the coming years, which is already evident as overseas investors hone in on the investment opportunities offered here.  

Over 100,000 students across Manchester’s four main higher education institutions give it the highest student population in Europe.

70,000 of these are not in student halls of residences, meaning they are renting privately within the city. This makes it prime territory for PBSA (Purpose Built Student Accommodation) investment.

Across the board, from the UK-leading purchase market, to the thriving private rental and student markets, right through to commercial investments, Manchester is winning. As growth in the city’s property market continues at an unprecedented pace, with huge investment fuelling projected growth for years to come, we remain confident in the continued promise that our city offers investors.

View our Property Investments

Our 2016 Summary

Our 2016 Summary

December saw another successful month for The House Crowd, which rounded the year off nicely for us and allowed us to start 2017 on the right foot. It was a very busy month, with 4 bridging loans being repaid, 1 property sold and seed capital repaid for one of our development projects. We paid out over £2.2 million in capital returned to 693 investors. You’ll find the stats, for December, as well as for our 2016 summary, below:

December 2016

Projects paid out against – 24

Total Value of dividends and interest paid – £195,747.96

Total Value of Capital Repaid – £2,057,295

Total paid out to investors for December – £2,253,042

Total number of investors paid – 693

2016 Final

Project paid out against – 240

Total value of dividends and interest paid – £794,126.60

Total Value of Capital Repaid – £4,554,720

Total number of investors paid – 5,506

Cumulative

Project paid out against – 434

Total value of dividends and interest paid – £1,135,625.00

Total Value of Capital Repaid – £5,005,720.00

Total number of investors paid – 8,498

We’re excited to see where 2017 takes us, and hope that you will join us for the ride. With many upcoming developments and exciting projects to invest in, we’re sure that 2017 is going to be a year to remember.

You can find all our latest investments by clicking here

 

An Introduction to Investing Through Property Crowdfunding

An Introduction to Investing Through Property Crowdfunding

Traditionally, only those with access to large amounts of capital have been able to invest in the lucrative world of property. Managing a portfolio is normally time-consuming, business, which becomes increasingly more burdensome as the investor’s portfolio becomes larger.

However, in the last few years, a new method of property investment has emerged which has effectively democratised the entire investment process, allowing more people than ever to benefit from the financial gains that property investment can offer.

Property crowdfunding started to take off in 2012, and is now worth billions of dollars a year worldwide. The value of the industry currently doubles every two months, and is set to be worth $250bn by 2020.

The growth of the property crowdfunding industry has been catalysed, in part, by the relaxation of regulations over the last few years. The Government has identified the industry as being hugely beneficial to the economy, and has also begun investing in crowdfunding itself. Institutional investment is also coming into play at an increasing rate, and high net worth investors, attracted by the simplicity of the process, and the returns available, are also investing through property crowdfunding.

But why is investing in property crowdfunding proving so popular?

Offering the chance to build a diverse portfolio without all the legwork involved in traditional property investment models, and with the opportunity for significant gains, it’s no surprise that investing in property crowdfunding has grown exponentially in the last few years.

What’s more, as interest rates on savings continue to crawl along the seabed, and returns from both rental and sales continue to rise, more and more people are waking up to crowdfunding as a simple way to grow their money.

How Does It Work?

Property crowdfunding encompasses both equity investments and debt based investment (also known as peer to peer secured lending).

The concept itself is relatively simple.

Equity investments involve a group of people pooling their cash to buy a property as shareholders through a ‘Special Purpose Vehicle’ (SPV). The SPV is a limited company, set up solely for the purchase of that property. The SPV handles all the work, fees and maintenance of the property, whilst the shareholders receive their proportion of the rental yields, and/or share of capital gains when the property is sold.

People can invest even very small sums in buying shares in the property. On some platforms, this is as low as £50, but the typical minimum is between £500 and £1000. One of the advantages of property crowdfunding is that you can spread your available capital over a number of different properties across the crowdfunding platform, to mitigate risk.

View our Property Investments

Getting started is a very quick and easy process. You simply register on your chosen website – it is an FCA requirement that only registered and accredited investors may participate, and, once registered, you simply select the properties you wish to invest in.

Debt based investments again involve pooling resources, in this instance, to make micro loans through the platform to a third party borrower. The loan as a whole is secured against the borrower’s property and the platform appoints an agent to act on behalf of lenders and take any necessary enforcement action. These types of investment are usually short term (up to 12 months, and pay a fixed rate of interest with no capital growth).

Where Did It Start?

The House Crowd is the longest-established property crowdfunding platform. It began trading in 2012 and offers both debt and equity investments. Since then, other companies have followed in their footsteps, such as Property Moose in 2013, and Property Partner and Crowdlords in 2014. The industry continues to expand, with several new platforms emerging each year.

Is It Regulated?

Property crowdfunding firms are all regulated by the Financial Conduct Authority (FCA), which ensures that platforms are managed properly, and that risks are made completely clear to investors. As with any investment, there is risk to capital – but it’s worth comparing this risk against other investment classes, and seeing how property crowdfunding stacks up.

Before investing through property crowdfunding platforms, it is very important to do your research. Every regulated platform should have the FCA authorisation number clearly visible on their website. If you can’t find these details, you should steer clear as they are not operating legally.

Is It The Right Choice For Me?

As with any investment, you need to take into account your personal circumstances to establish whether it is the right one for you.

You can find out more about establishing whether property crowdfunding is the right investment for you here.

Ask yourself what you wish to achieve. Investors with a lot of professional experience and access to bank funding, may find the model less appealing than novices.

If, on the other hand, you don’t have a deposit available, or aren’t able to get a mortgage, then investing through property crowdfunding could be an ideal way for you to access this asset class. And, given the government’s recent attacks on landlords, which has severely undermined the profitability and viability of buy-to-let investing for individual investors, it may well be that crowdfunding remains the only sensible option available for most.

Risk

The same principles that apply to other forms of property investment also apply to crowdfunding. You should be aware that capital growth profits are speculative, and investing in properties that produce a healthy cash flow is the more sensible approach.

One of the major risks associated with cash flow positive properties is that of damage or non-payment of rent. As such, you should always factor this in as an eventuality that may affect your yields. As mentioned above, however, if you have a well-diversified portfolio, with your capital spread over several properties, any losses due to one bad tenant will be more bearable than if you had all your eggs in one basket.

View our Property Investments

At the end of the day, it all comes down to your risk tolerance. You do lose a large amount of leverage by investing through property crowdfunding, and you will only benefit proportionately from the property’s capital growth but, at the same time, having no borrowing means significantly less risk as there are no mortgage payments and no danger of the property being repossessed (as shareholders own it outright).

If making crowdfunded debt-based investment, (aka peer to peer lending) you need to know what would happen if the borrower defaults and does not repay the loan. You should ask questions about how your investment would be protected, what happens in the event of a default – how easy is it to take control of the secured property? – and how much equity is available to enable you to recover your money should the worst happen. Unless there is sufficient equity in the property, you could risk losing some or all of your money.

If you opt for debt-based investments, your investment will be secured by a legal charge. A critical matter to consider is at what LTV the loan is made. If, for example, a loan is made at ‘75% LTV’, it means that you will be at risk of losing some of your capital if the borrower defaults, the property has to be seized, and is sold for less than 75% of its current valuation.

Debt investments are generally considered to be lower risk than equity investments, as lenders are always paid out before shareholders, however, you do not get the potential upside of capital growth.

What About If I Want Out of My Investment?

If you need a liquid asset, then property is not the best choice.

Investing through property crowdfunding facilitates liquidity to some degree as it may be easier to sell shares in a property than the whole property. However, there is never any guarantee that you will be able to find a buyer, and, if you cannot do so, you will have to wait until the property is sold.

Some platforms will help you to find a buyer after the expiry of a minimum term, but you should check the small print before you invest. If you’re looking for a short term investment, P2P secured lending may be the better option.

To Conclude

We hope that this has offered you some valuable insight into getting started investing through property crowdfunding. Of course, you should know everything about the ins and outs of any investment before you part with your money, and we are fully committed to helping you know all you need to.

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If you have any questions, you can always get in touch with us and we will be very happy to fill you in.

Property Crowdfunding: Is It The Right Investment For Me?

Property Crowdfunding: Is It The Right Investment For Me?

Property crowdfunding is becoming an ever-more popular way for people to invest in property, often with significantly less money than investing the traditional way. However, before you jump in, it’s a good idea to assess whether this is the right investment choice for you and your circumstances.

You can view our current property investment options here.

What Do You Want To Achieve?

The first question to ask yourself when considering property crowdfunding is what you wish to achieve from your investment.

If you are looking for an investment that requires less ongoing attention than owning a property for either development or rental, or you personally have more faith in the property market than the stock market, then it could be right for you. Nonetheless, plenty of investors in property welcome the sense of control that owning a property outright brings.

Though there is more additional financial outlay involved in the purchase and maintenance of a property owned this way, some people would rather be involved in all aspects of their investment than leave it to another party.

You can find out more by registering here.

What Experience in Property Investment Do You Have?

This follows on to the second question you need to ask. How experienced are you as a property investor?

If you’ve been a full-time, outright property investor for some time, and have access to the bank funding required to own and develop a property yourself, then property crowdfunding may be less appealing.

For those who know how the market works, and perhaps already have all the necessary contacts they need for the properties they invest in, benefitting from more of the profits (after paying off loans), as opposed to their share percentage, may be a more attractive investment option.

If none of this applies to you, then you could be the sort of person who would benefit from property crowdfunding, depending your circumstances.

What Are Your Circumstances?

For novice or less experienced investors, or those who have less access to bank funding, then property crowdfunding can offer an opportunity to invest in property that is unavailable through other means. For those who are interested in the prospect of weathering the risks of property investment, rather than earning scarcely any interest on their savings accounts, again, property crowdfunding may offer an alternative path.

Whenever you consider an investment, whichever form this may take, you need to ensure that you are covered in the event that the investment takes a turn for the worst. You should only ever invest what you can afford, so make sure your calculations are correct, and you won’t cause yourself financial harm if, for any reason, the value of your investment falls.

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To Conclude

As a final note, if you decide to invest in property crowdfunding, there is further investigation to be undertaken. You will need to choose the right crowdfunding platform. It is very important to do your research, and to only settle on the platform that meets all your needs and requirements. Make sure they are regulated by the FCA, that they have a good reputation, and that their customer service and complaints procedures meet your standards.

View our Property Investments

Entrusting your money with any investment vehicle is a decision that should never be made lightly. Ensuring that you are confident with all aspects of the investment is crucial, including the issue of risk. Property crowdfunding is no different to most other investment types, in that there is always a risk of loss. Knowing everything you can, and choosing the right investment for you, is the key to investing happily, smartly, and – hopefully – profitably.

 

Property Crowdfunding Investment or Buy to Let?

As the UK Government sweeps in with more and more tax changes on the buy-to-let sector, property crowdfunding investment becomes an increasingly attractive option.

Jeremy McGivern, founder of Mercury Homesearch, has stated that he thinks that property crowdfunding investment is likely to represent the biggest change within the housing market over the next few years.

However, along with his comments, McGivern issued a strong warning that the rise of property crowdfunding investment could have a ‘catastrophic’ outcome. Whilst the general consensus is that the rise of the property crowdfunding industry is a positive development, in that it democratises property investment, McGivern thinks that allowing a wide range of people to access the previously out-of-reach property market could lead to irresponsible investment, as people fail to understand the risks involved.

Lee Grandin, of peer-to-peer lending platform Lend2Landlord, surprisingly concurred: “Any mechanism such as a P2P platform that engages a funder that is not able to make a sound decision on whether to lend its money is a total disaster.”

He went on to make the point that “…risky investment should be limited by your net worth but Brexit clearly shows you can’t dictate what people should or shouldn’t do so that is unlikely to ever happen.

“There is only ever one message you can ever say and it must be said clearly and concisely: Your capital is at risk; you could lose all your money.”

But are they right about property crowdfunding investment?

Whilst Grandin and McGivern do have a point about the risks of getting into P2P lending or property crowdfunding investment without adequate understanding of the risks involved, we would argue that the vast majority of investors are intelligent and informed individuals.

In order to pass the registration process, at The House Crowd for example, prospective investors must pass a test. They must show they understand what property crowdfunding involves, as well as its risks, before they are allowed to continue. Furthermore, FCA regulation holds property crowdfunding platforms to strict controls that must be legally adhered to. Investors must be ‘clearly and concisely’ (as Grandin puts it) aware of the risks, and we aim to do this at every opportunity.

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Perhaps McGivern and Grandin underestimate investors in property crowdfunding. We certainly see a wide range of benefits to the property crowdfunding and P2P lending model. At a time when the buy-to-let market is increasingly strangled off, at the same time as the number of renters continues to grow, the model provides a much-needed solution.

Of course, being absolutely aware of the risks, and exploring all avenues for investment before deciding on property crowdfunding is vital. Investing money is a serious matter, and not one that most people take lightly. And nor should you.

We continue to be fully in favour of the democratising force of property crowdfunding, and the continued flow of movement it gives the property market. In the North West in particular, increasing levels of property crowdfunding go hand in hand with the wealth of regeneration that is building a bright future for the region. There continues to be a real problem with shortage of affordable homes, and property crowdfunding might just be one of the solutions to that.

View our Property Investments

The Latest Crowdfunding News – 6/10/16

The Latest Crowdfunding News

 

Hi guys and welcome to another crowdfunding news edition, as usual, we will be travelling around the UK and around the globe in order to give you a snapshot of the latest goings-on in the crowdfunding world. Today we start our round-up and focus on The FCA and Cambridge University partnership, both have teamed up to review the current state of alternative finance, to ending our round-up in China. Missed our previous blog round-ups? If so, catch up here.

 

FCA & Cambridge University Team Up to Review UK Alternative Finance

hands

The Financial Conduct Authority (The FCA) and the Cambridge Centre for Alternative Finance (CCAF) have teamed up to assist in the review of the UK alternative finance industry. The joint project will inform the FCA’s ongoing post-implementation review of crowdfunding regulation which is currently in process.

There’s a consensus that the UK is a global leader when it comes to alternative finance regulation.

Moreover, The Cambridge Centre for Alternative Finance is a global leader in research on disruptive finance. The pair will be working on a program of research that will identify any changes in the nature of the industry,clients’ expectations, plus its overall place in the financial services landscape.

The unique partnership will be primarily looking at what the crowdfunding investor population really looks like and how it is evolving, another research area that they will be investigating is how investors on the platforms understand the risks involved, as well as how they use the information provided to them by fundraisers. In addition, their research will look at the types of investments crowdfunding platforms are competing with for investors’ money, plus how these platforms and investors share the burden of due diligence and whether an expectation gap exists between the two.

 

Santander UK Strikes a Partnership With an Alternative Finance Company

Santander

Santander UK has struck a partnership with an alternative finance company to fund social enterprises in a deal that marks the first tie-up between a large British high-street bank and a crowdfunding site. (FT.com,October 2016)

The banking giant is joining forces with Crowdfunder to provide £200,000 to community projects, charities and enterprises that are focused on social change across the country.

The bank will donate half the funding target of a project once it raises 50 per cent from the public online.

This headline has gained attention because the partnership further closes the gap between mainstream and alternative finance, it also paves the way for closer collaboration between a well known high-street lender and the crowdfunding sector.

Back 2014, Santander UK paired up with Funding Circle referred small business customers looking for loans to the P2P lender when the bank was unable to serve them.

However, the deal with Crowdfunder is different because equity crowdfunding involves raising money from the public who each gain a share in the company.

Managing director of Santander Business Banking, Sue Douthwaite, told the FT : “Our purpose is to help people and businesses prosper and we recognise the important role social enterprises and charities play in helping communities to thrive.

“With the power of the crowd, our £200,000 Changemaker Fund will help bring great ideas to life and enable social enterprises and community ventures to grow.”

Image source : FT.com

Africa : Has Crowdfunding Potential but Regulatory Laws need to Catch Up

Africa Crowdfunding

Last year crowdfunding platforms in Africa raised $32.3 million for various projects, data from the Afrikstart Crowdfunding in Africa report reveals. However, that figure could be much higher over the coming years if governments across the continent developed crowdfunding regulations.

As Nigerian journalist Yomi Kazeem mentions in his article for QZ.com, despite its rising popularity, the most common limitation of crowdfunding across most African countries, is a lack of legal and regulatory framework.

The Afrikstart Crowdfunding in Africa report states : “The absence of regulation limits the expansion of equity-based or debt-based crowdfunding platforms in Africa.”

Therefore, having a lack of regulation in place is likely to deter investors from using online platforms as there is no investor protection in place.

However, despite having regulation limitations, with cost of access to internet dropping in parts of Africa and smartphone penetration deepening, on the plus side, more Africans are taking advantage of crowdfunding platforms to finance projects ranging from start-ups to social causes.

South Africa comes out on top when it comes to crowdfunding, The Rainbow Nation’s platforms have raised $30.8 million, it’s worth noting that $32.3 million was raised by crowdfunding platforms from all over Africa, so it just goes to show how well South Africa is championing the concept.

The country’s dominance in crowdfunding on the continent is not accidental. According to a report, the popularity of crowdfunding in South Africa is down to the country’s “sophisticated business market, a robust and reliable regulatory credit system and supervision.”

Although not 100% perfect, other African countries can learn a lot from South Africa and adopt a more robust crowdfunding strategy.

 

Restaurant Chain “M” Secures £1.2M Just Hours After Seedrs Campaign Debut

M Crowdfunding

Just hours after restaurant chain M launched its equity crowdfunding campaign on Seedrs, the London-based company has successfully secured £1.2 million out of its £1.3 million funding goal. (Crowdfund Insider, October 2016)

Since its launch back in 2014, the chain has received numerous awards such as : Best Use of Technology The Cateys 2016, Best Young Chef UK & Ireland 2016, San Pellegrino Awards, Best for Steak and Seafood, and many more.

For those that invested in the campaign, starting with the investors that put £10k into the campaign, they will receive 25% discount at M until January 2019, a copy of Executive Chef Michael Reid’s M: a 24- Hour Cookbook, free membership of M DEN, our luxury private members lounge plus, 15% off online wine purchases.

The investors that put in between £1,000 – £9,999 will receive a 15% discount at M until January 2019, a copy of Executive Chef Michael Reid’s M: a 24- Hour Cookbook and free membership of M DEN,  their luxury private members lounge.

Lastly, those who invested between £200- £999 get 0% discount at M until January 2019 and a copy of Executive Chef Michael Reid’s M: a 24- Hour Cookbook.

You can read more about the crowdfunding campaign here.

Image source : Crowdfund Insider

Crowdfunding The Great Wall of China

great wall of china crowdfunding

Heritage officials have launched a crowdfunding campaign to help pay for restoration work on the Great Wall of China.

China Radio International has reported that more than 16,000 people have donated online since the campaign started at the end of August, raising almost 300,000 yuan ($45,000; £34,000) so far (stats taken from last month).

Dong Yaohui, who’s in charge of the fundraising effort, mentioned on the BBC website : “By pooling the contribution of every single individual, however small it is, we will be able to form a great wall to protect the Great Wall.”

The funds made will go towards restoring the Xifengkou section, which runs through a reservoir, and all of the project spending will be made public.

 

What Are Your Thoughts?

 

Which of our chosen crowdfunding stories has interested you the most? We would love to hear from you, feel free to leave us a comment on our Facebook and Google Plus pages. If you prefer to tweet us, tweet @TheHouseCrowd.

In the meantime if you want to know more about Property Crowdfunding do register for our Information Pack which will tell you all about it.

Register Now for more Info

The Latest P2P News – 16/9/16

P2P News – All The Latest Updates

 

Hi guys and welcome to another P2P news round-up, as usual we will be giving you a snapshot of the latest goings-on in the P2P world. Today we look at an array of news items from there is no evidence of P2P investors underestimating risk to focusing on what the P2P and marketplace lending industry needs to do to go mainstream. Missed our last P2P news round-up? If so, catch up here.

No evidence of P2P Investors Underestimating Risk

P2P Lending

Last month, former FCA chief executive, Tracey McDermott, voiced concerns about the rapid growth of the P2P marketplace that could potentially leave some investors unaware of the risks.

However, the P2PFA’s (Peer-to-Peer Finance Association) director Robert Pettigrew, stressed that this was not the case.

Mr. Pettigrew recently mentioned that although approaches varied depending on the company, the P2PFA was dedicated to ensure investors were aware of all the risks involved.

In addition, he stated : “Different platforms have adopted a variety of approaches to ensure a high level of consumer understanding, but with continued grow and expansion in the sector, the focus on making sure that all investors have an awareness and understanding of the risks of peer-to-peer finance products will continue to be a major priority for P2PFA platforms.” (Bridging & Commercial, September 2016)

Platforms such as LendingCrowd and LandBay recommend that investors should require financial advice if they are unsure about the investing process.

Stock Market VS Peer-to-Peer Lending Investments – Who Wins?

stock market p2p

To buy stock, or not to buy stock that is the question! With recent markets in a volatile state you might want to look for an alternative.

Anyone who is an active stock market investor knows that it takes time to do your research (and a bit of guess work) to figure out where the market(s) are heading.

However, if you’re looking for something that’s less time consuming and slightly more effective – P2P might be for you. There are many platforms out there that are free to pick through the loans that are listed by prospective borrowers and read their stories and explanations of why they need a loan for and what they’ll do with it.

You should review the prospectus of your chosen P2P lending platform before investing as well as spreading the risk of your investment.

With any investment there is always risk involved, however, many view P2P is an alternative, especially with the current volatility of the markets. Anyone looking to diversify their investment and move away from traditional investment options might want to go down the P2P route.

Interested in P2P? If so, why not take a look at our P2P page where you can view investments and order a free information pack.

Brexit Vote Scares Investors Away From Traditional Asset Classes

Brexit P2P

New research suggests that the UK’s Brexit vote is putting investors off traditional asset classes.

Research revealed that 13 per cent of active investors said they have steered clear of currency markets since the EU vote back in late June, in addition, 10 per cent have avoided government bonds and nine per cent have u-turned from investing in equities.

Leicestershire based P2P lender ThinCats told City A.M. that 30 per cent of investors – from a survey of 2,000, including 500 defined as active investors have been put off traditional asset classes.

However, the research showed that assets such as gold has become more attractive, 14 per cent of investors stated that they have turned to the commodity as an alternative. Moreover, 7 per cent, said they view P2P as more attractive after the Brexit vote.

What P2P and Marketplace lending Industry Needs To Do To Go Mainstream

imgp2p

A lack of transparency is one of the key obstacles for p2p and marketplace lending platforms experiencing considerable growth in scale, according to ThinCats’ John Mould, who believes there are several other hurdles the industry needs to overcome to fit into the mainstream investment universe. (Altfi, September 2016)

It’s fair to say that 2016 has been a challenging year for the industry which has seen high profile scandals as well as seeing slow growth.

ThinCats’ CEO told Altfi that he believes the broader industry should deal with several issues centring on greater transparency in returns, what investors are exposed to and securitisation. Mr. Mould says that many platforms are really asset management firms in disguise and should therefore be regulated as such.

Areas where Mould stresses investors and borrowers need greater transparency is in provision funds, collective pools of cash liquidity that act as a type of insurance for investors.

In the Altfi article he also questions the lack of clarity that is linked to retail and institutional investors. He stresses that the issue is that we are not quite sure how they are both treated fairly. We know in a fund that they all come at the same unit price, he mentions, but he questions on who makes the decision process on the loans?

He again questions the lack of clarity in the last paragraph of the article : “If you’re the regulator you’re saying half of them look like fund managers, half of them look like banks but worse and half of them have these provision funds that we don’t know how they work and half of them just seem to be securitising debt. How does that work?”.

 

 

What Are Your Thoughts?

Which of our chosen P2P stories has interested you the most? We would love to hear from you, feel free to leave us a comment on our Facebook and Google Plus pages. If you prefer to tweet us, tweet @TheHouseCrowd.

In the meantime if you want to know more about Property Crowdfunding do register for our Information Pack which will tell you all about it. 

Register Now For More Information

The Latest Crowdfunding News – 12/9/16

The Latest Crowdfunding News

Hi guys and welcome to our first September crowdfunding news edition. As usual we will be taking a look at the latest goings-on in the world of crowdfunding and today we start our round-up by focusing on Kickstarter who have headed east and launched in Asia to looking at how European alternative finance performed in 2015. Missed our recent round-ups? If so, catch up here.

Kickstarter Launches in Asia

Kickstarter Asia

Kickstarter, one of the most well known crowdfunding sites has launched in both Hong Kong and Singapore respectively, and are their first ever sites in the continent.

Prior to launching in Asia, Kickstarter only operated in Europe, North America, and Australia.

In the past, entrepreneurs from Singapore and Hong Kong had to co-operate with overseas partners if they wanted their ideas published on the site.

With the crowdfunding giant now launching in Hong Kong and Singapore, people can present their projects from a local network as well have their fundraising goals set in Hong Kong/Singapore dollars.

Kickstarter will now compete with local sites such as FringeBacker from Hong Kong as well as the likes of OurCrowd and MoolahSense from Singapore.

Just like other crowdfunding sites, Kickstarter gains a cut from each project that has been pledged by its backers.

Well known Kickstarter projects include the Oculus Rift, which received its first funding via Kickstarter back in 2012 to the Pebble smartwatch.

Image Source : BBC News

Finnish Crowdfunding Act Updated

Finland Crowdfunding

From Asia to now travelling to Scandinavia! A few days ago in Finland, the government updated its crowdfunding act, the new legislation makes it easier to register, for example, until now, equity crowdfunding in the Scandinavian country has required an investment firm license from the Finnish Financial Supervisory Authority (FIN-FSA). However, the license slowed the market entry for new players.

Registration is a considerably more affordable alternative to the investment firm license, and this therefore allows new players into the market.

Investor protection is still at a good level under the new act, despite the fact that the registration process is a lighter form of regulation than a license.

In addition, the new Finnish crowdfunding act does not cover rewards or donations based crowdfunding models. For example, rewards-based models that are used by the likes of Kickstarter fall under consumer protection acts. In contrast, donation based crowdfunding in Finland is legal, anyone who wishes to create a donation based campaign must obtain a special fundraising permit from the police.

To sum it up briefly, Whilst the overall market size of alternative finance in Finland is relatively small, the government and industry bodies are hopeful that a balanced regulatory approach will help boost the up and coming sector.

Native equity crowdfunding company Invesdor’s CEO Lasse Mäkelä recently told Crowdfund Insider that the new Act should increase growth of the Finnish crowdfunding market. He stated :
“On a European level, crowdfunding volume is expected to double this year. We believe that with the new legislation Finland will be able to reach similar numbers.”

Crowdfunding in a tub! A brief insight into Oppo Ice Cream

Oppo Crowdfunding

At The House Crowd we love a good crowdfunding story and thought this was worth a mention (especially if you love ice cream!).
Back in 2015 Oppo Ice Cream at the time, was the most the “most overfunded” offer ever on Seedrs.

The London based company had originally set out to gain £150,000, however, they received triple the specified amount. Earlier this year they was again returned for further funding via Seedrs and smashed their £150,000 in just six hours!

Just like us, they too went on Dragon’s Den, they might not of had much of a slaying as what Frazer experienced, but again just like us being on the show helped propel their product.

Although they came out of the den empty handed, they revealed that they had no intention of taking The Dragon’s money as they had already funded the business by offering shares to their fans which they felt was a much better way of growing their brand. Going on the show for them was about spreading their message to the British public that you can indeed indulge in luxury ice cream… without looking like you have.

As we know, gaining business success is not a walk in the park, and it is something that takes hard work to cultivate. Oppo is also a great example of a small company that leveraged investment crowdfunding to take their business and product to the next level and a tasty investment it turned out to be!

Image source : Crowdfund Insider

FCA Calls for Input on Equity Crowdfunding Regulation

Crowdfunding FCA

Upon releasing the new rules in 2014, the FCA promised a post-implementation review of the crowdfunding market and regulatory framework in 2016 (the “Review”). (Lexology, August 2016)

The financial body has released a ‘Call for input’ which describes the results of their initial market research and sets out a number of questions. The questions are linked to a range of areas and the document contains some hints on the future direction of investment based crowdfunding regulation.

Firstly, one key area that they will be taken into consideration is due diligence. Current regulations do not set a minimum standard of due diligence, the regulations cite concerns relating to financial crime and stresses the importance of protecting the interests of investors. They therefore suggest that minimum standards may be introduced.

Secondly, they’ll take client assessment into consideration. The regulator wants to review the extent to which firms are meeting these requirements and whether clients are sufficiently informed to understand the risks that are involved. In addition, they may consider publishing further advice on how to ensure retail investors meet certain criteria as well as introduce sanctions for companies who do not abide by the rules.

Lastly, the FCA will be looking at disclosure. As Lexology mention in a recent blog article, equity crowdfunding platforms are required to provide potential investors with sufficient information so that they are reasonably able to understand the nature of the product and its risks.The Review will look at whether this high-level rule is sufficient to protect investors.

So what happens now? There are currently no proposals to change the regulatory framework for crowdfunding platforms. However, anyone with an interest in equity (or loan-based) crowdfunding has to submit their response to the FCA before 8 September 2016. The feedback will then be used to inform the FCA’s continuing review of the current market. After the Reviewing process, the financial regulator will consider publishing a new consultation document which will include any proposed rule changes.

 

European Alternative Finance Jumps to €5.4 billion in 2015

Europe Alternative Finance

One news story in particular that we stumbled across this week and everyone in the alternative finance community was talking about was Europe.

A report published by the Cambridge Centre for Alternative Finance (CCAF) entitled “Sustaining Momentum“, looks at the rapid growth of alternative finance across Europe.

In a nutshell, the CCAF reports on the ongoing growth of alternative finance including peer to peer lending, crowdfunding and more. Their findings show that alternative finance jumped 92% year over year to €5.4 billion in 2015.

In addition their research revealed that the UK continues to dominate the continent at €4.4 billion in aggregate funding. France and Germany are second and third with €319 million and €249 million respectively. The Dutch also performed well with €111 million. If you remove the UK out of the picture, European alternative finance increased by 72% year over year going from €594 million in 2014 to €1.019 billion in 2015. While the overall rate of growth slowed, the industry is gaining momentum as new regulations from across the continent take place as well as an array of platforms start to mature.

Interested in the CCAF’s research? If so, read their research embedded below.

CCAF Europe 2016 Sustaining Momentum – Final by CrowdfundInsider on Scribd

 

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The Alternative Finance Marketplace: How is Real Estate Shaping Up?

We’ve been eagerly poring through NESTA’s 2015 UK Alternative Finance Industry Report, ‘Pushing Boundaries’, since it was published in February this year. The report offers a fascinating, in-depth look at all areas of the alternative finance industry, including – crucially – the Real Estate Alternative Finance (crowdfunding and Real Estate P2P lending) market.

If you like data, you’ll love it. But if you’d prefer something a bit more readable, you’ll be pleased to hear that we’ve put together our own guide to the state of the alternative finance industry, keeping the emphasis squarely on Real Estate Alternative Finance, of course.

Things have changed since NESTA published its report, ‘The Rise of Future Finance’ in 2013. At that time, the alternative finance industry was worth £939m.  In 2015, NESTA reported its value at £3.2bn. The market is on course to surpass the £5bn mark in 2016.

Real Estate Alternative Finance - QUOTE 1

It’s not just financially that the alternative finance sector has grown. It has evolved taxonomically, too.

In the 2013 report, NESTA identified a range of distinct funding models operating in the sector. Two years later, 28% of alternative finance platforms surveyed reported that they were operating a ‘mixed’ or ‘other’ business model, which does not fit into the existing taxonomy.

Real Estate Alternative Finance: Crowdfunding and P2P Lending Tops the Tables

The 2013 report has no mention whatsoever of the terms ‘real estate’ or ‘housing’. And yet, by 2015, NESTA’s report segments data on Real Estate Alternative Finance into its own category, such is the proportion of the industry it covers.

In 2015, Real Estate and Housing was the most popular sector for the alternative finance market.

  1. Real Estate and Housing
  2. Technology
  3. Manufacturing and Engineering
  4. Food and Drink
  5. Retail and Wholesale
  6. Leisure and Hospitality
  7. Community and Social Enterprise
  8. Finance
  9. Construction
  10. Education and Research

Combined debt and equity-based funding for Real Estate Alternative Finance amounted to nearly £700m in 2015, with P2P business lending in Real Estate (for mortgages and property development) taking the lion’s share: £609m – 41% of the total volume of P2P business loans in 2015.

The market volume of equity-based crowdfunding is much more modest, coming in at £87m for 2015, still a very significant sum.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 2

P2P Business Lending in Real Estate

In 2015, P2P real estate lending financed over 600 commercial and residential developments, mostly by small to medium sized property developers.

Of that hearty £609m funding sum for 2015, Real Estate P2P lending saw increased growth throughout the year:

Q1 → £120.78m

Q2 → £146.81m

Q3 → £152.96m

Q4 → £188.12m

Perhaps some of this extraordinary success has something to do with institutional funding in the P2P Real Estate lending sector? Institutional funding was around 25% in 2015, and up to 75% on some platforms.

P2P business lending for Real Estate comprises a range of financing models and products. There are the short term bridging finance loans, which run for a 12 to 18 month period. Them, there are the longer term (3-5 years) commercial and residential mortgages, and construction/development debt finance.

In 2015, the average size of P2P loans for Real Estate came in at £522,333, slightly under 2014’s £662,425 average. The figure for 2015 was more in line with the average UK house price than the previous year. This may be due to the growing use of P2P lending in funding residential and commercial mortgages, rather than the larger developments focused on in 2014.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 3

Just a quick clarification point here: regulatory constraints mean you cannot use P2P Real Estate lending for your own residential mortgage.

It’s also not a done deal to apply for a loan for a Real Estate development: in 2015, 27.5% of loan applications in P2P Real Estate lending were accepted.

The average number of lenders required to fund a typical P2P Real Estate loan? 490.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 4

Equity-Based Crowdfunding for Real Estate

This model enables investors to acquire ownership of a property asset, via the purchase of shares, either of a single property, or a number of properties as part of a portfolio.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 5

In 2015, equity-based crowdfunding for Real Estate raised a total of £87m, for 174 development projects. This is how the annual quarters looked:

Q1 → £13.09m

Q2 → £23.16m

Q3 → £35.70m

Q4 → £14.63m

Equity-based crowdfunding for Real Estate had a great year in 2015. The record for fastest funding for a development project was set: £843,100 was raised in just 10 minutes and 43 seconds, from a total of 319 investors!

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 6

Unlike P2P Real Estate lending, with equity-based crowdfunding, there is scarcely any institutional involvement. Of the 10,626 funders participating in Real Estate crowdfunding, NESTA found that only 3% were categorised as institutional investors by the platform. This contrasts with the 77% of sophisticated or high net worth investors in the model.

Yes, equity based crowdfunded property investment is much more grass roots in many ways than the P2P Real Estate sector. The recent inclination to lower minimum investment thresholds in this area, with the aim of enticing more retail investors attests to this in a very clear way.

Whilst 27.5% of loan applications in P2P Real Estate lending were accepted in 2015, in equity-based crowdfunding for Real Estate, platform acceptance rate was much lower. Only 2.9% of deals made it onto the platform, on average.

However, deal success rate for those who did make it onto the platform was pretty high: 87%. There are also far fewer investors required for an equity deal – NESTA reports an average of 150 per deal. The average deal size for 2015 in the crowdfunding sector for property was fairly high, too: £820,042.

Real Estate Alternative Finance and Manchester

Of the 58 alternative finance platforms surveyed by NESTA for their report, 62% were – unsurprisingly – London-based. However, a significant 5.2% hailed from our home city of Manchester.

Manchester is also one of a number of regional and local authorities that have either partnered with online alternative finance platforms to fund local SMEs, or have used alternative finance methods to fund community projects.

NESTA’s data shows that the most active regions receiving funds from Real Estate crowdfunding were London (of course), the North East, and the North West. The North West was also found to be one of the top 3 regions actually providing funds.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 7

This isn’t terribly surprising given the growing trend for emphasising Real Estate crowdfunding within areas in need of regeneration. Manchester has, as we know, come a very long way. The economy of the North West has been transformed over the last few years, in no small part due to the heavy investment in regeneration projects, in the form of development funding from both the public and private sectors.

It is these regeneration areas that are being identified as some of the potentially best investment opportunities. Not only do they cost investors less than prime locations, but these areas are also the ones that will experience the highest growth over coming years.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 8

Real Estate Alternative Finance and The Government

Direct investment from the government has helped support the growth of both peer-to-peer and crowdfunding markets. In 2015, £60m was lent by the British Business Bank via P2P lending platforms, specifically for SMEs.

Tax incentives have also been applied, including the EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme). These schemes have been widely used, by a large proportion of investors using alternative funding platforms, and have been especially popular within the equity-based crowdfunding market.

The launch of the IFISA (Innovative Finance ISA) in April 2016 is also an exciting development in the alternative finance sector.

In particular, P2P business lending platforms for Real Estate expect the IFISA to generate a whopping 51.9% growth in transactional volume this year, whilst equity-based crowdfunding platforms for Real Estate predict 30.31% growth as a result of the IFISA.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 9

The figures for Real Estate Alternative Finance outmatch those elsewhere in the alternative finance market. P2P consumer lenders, for example, expect a 26% increase in total volume as a result of the IFISA. It’s clear that Real Estate lending stands to benefit the most.

In anticipation of the influx of retail investors expected by the onset of the IFISA, some P2P Real Estate lending platforms are even lowering their investment thresholds.

What is the IFISA?

At its most basic, the Innovative Finance ISA allows UK investors to lend money using P2P lending platforms to invest up to 100% of their £15,240 annual ISA allowance, and to receive any interest and capital gains tax-free. You can find out more here.

Institutional Investment in Real Estate Alternative Finance

Catching the scent of a good thing, institutional investors are also muscling in on the peer-to-peer real estate lending market, as they are across the alternative finance industry.

It is estimated, based on platform reporting, that in the UK in 2015, 1,031 institutional funders were at the bottom of financing loans and equity deals in alternative finance.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 10

45% of all alternative finance platforms reported institutional involvement in 2015. In 2014, this was 28%, and in 2013, just 11%.

For P2P business lending, in 2015 26% of total funding was attributable to institutional funding. In peer-to-peer Real Estate lending specifically, a total of 25% institutional funding was reported, with significant increase between the 3rd and 4th quarters of the year, in particular:

Q1 → 22%

Q2 → 22%

Q3 → 23%

Q4 → 31%

By contrast, however, in equity-based crowdfunding, 2015 saw just 8% of funding coming from institutions.

With institutional funding growing in the alternative finance market, as well as the influx of more high net worth investors, there is some discussion about whether the disruptive force of the alternative finance market is at risk of being stemmed.

Banking institutions have found themselves burdened with heavy regulatory compliance, cumbersome legacy systems and bureaucratic complexity. Since the debacle at the end of the last decade, the general populous has been hungry for new alternatives to the traditional financial system. Confidence has been lost, and – at the retail end of the investment spectrum at least – making one’s savings grow within the received systems has less potential for gains than what’s promised by alternative finance.

Alternative finance has become a key player in the development of a whole new generation of financial products. Along with a range of other FinTech solutions to saving, banking and investment, this revolutionary rumble has got the banks concerned.

It’s no wonder that, as such a disruptive movement grows, it finds itself on the precipice of being co-opted into the corporate world. But all the time that interest rates on savings accounts remain shockingly low, and first-time buyers view getting on the property ladder as likely as a winning Euromillions ticket, the prospect of a less suffocating alternative for growing money will continue to be thoroughly desirable.

And, focusing on Real Estate specifically, research conducted by Crowdstacker found that 44% of retail investors would like to increase their exposure to the UK property market, not only owning their own home, but also by investing through P2P lenders, like The House Crowd. Investor reluctance was found to centre around the time consuming nature and costs of property management, as well as affordability. The alternative finance model of crowdfunded property investment and P2P lending in Real Estate removes those factors from the equation.

2015 also saw the emergence of self-managed, platform-owned listed investment trusts, funds and vehicles: a sure sign that platforms are preparing to challenge the fund management space.

And as the alternative finance world continues to evolve, we are also seeing the emergence of a number of independent online aggregators, such as Informed Funding, FinPoint and ABF. These are rising up to provide additional channels and services for connecting business fundraisers to alternative finance platforms.

That being said, corporate interjection into the alternative finance space should not be considered a negative. It is this involvement that is allowing the industry to grow and evolve.

A number of P2P consumer lending platforms have struck high profile partnership deals with some big-name corporates.

REAL ESTATE ALTERNATIVE FINANCE - QUOTE 11 - THE HOUSE CROWD

Corporate partnerships have been witnessed between alternative finance platforms and large brands such as Virgin, Amazon, Uber and Sage. As NESTA puts it, these partnerships are “fusing the traditional corporate world with the disruptive models of alternative finance”.

It is these partnerships that will aid in increasing public awareness of the alternative finance sector, but not only this. Corporate partnerships will also attract high quality borrowers, reducing default rates on P2P loans, and also offers the potential for data gathering, which will enhance the industry’s credit scoring capabilities, and inform risk management.

The increasing involvement of high net worth investors, along with institutional funding and corporate partnerships is what is allowing alternative finance to push boundaries, blur definitions, and limit the dangers of orthodoxy: it is a catalyst for rapid evolution.

Conclusion

The extraordinary growth of the industry that we have witnessed over the last few years has begun to level out.

In 2015, the UK’s alternative finance industry facilitated investments, loans and donations totalling £3.2bn. In 2014, this figure was £1.74bn – a YoY growth rate of 83.91%, which is not to be sniffed at. But when you compare this to the 161% growth between 2013 and 2014, it looks positively small.

REAL ESTATE ALTERNATIVE FINANCE REPORT - QUOTE 12 - THE HOUSE CROWD

In 2014, 24 new alternative finance platforms began trading. This was down to 14 in 2015. Fewer new entrants are joining the market, whilst existing platforms continue to increase their total volumes at a steady rate.

Up until now, the industry appears to have been actively pushing its boundaries, both in its evolution, and in its rate of growth. Whilst the figures continue to be staggeringly impressive – with the market on course for a £5bn year in 2016 – plateauing figures are a good sign that the industry is maturing.

Alternative finance is coming of age with intelligence and dignity. It is listening to influential voices from big corporates, accepting helping hands where they are offered, and maintaining its grass roots persona. Most of all, however, it’s making money, not just for a few, but for a large body of investors all along the wealth spectrum. In Real Estate, it’s helping to regenerate run-down neighbourhoods, keeping a stagnant housing market moving, improving living standards across the board.

REAL ESTATE ALTERNATIVE FINANCE REPORT - QUOTE 13 - THE HOUSE CROWD

In short, alternative finance may have been a disruptive teenager, but it’s growing up to be a real force for good in the middle of a blighted financial landscape. The future of finance is looking promising.

 

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