With 80% growth in 2019 and more than $332 million (€300 million) collected, the real estate crowdfunding market remains, this year again, the most lucrative branch of equity finance and the one with the lowest default rate in the sector, with 0.5% in the first half of 2019. With new regulations, acquisitions or business concentration, 2019 proved to be a strategic year for this mature market.
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A market that continues to grow dynamically
At the beginning of December, the total amount raised over the year was estimated at more than $332 million (€300 million), representing an increase of nearly 80% compared to last year. In terms of the number of projects financed, the increase is less significant but is explained by the scale of the operations offered to investors.
This trend will only accelerate beyond the new peak of $9 million (€8 million). After five successive years of positive activity, real estate crowdfunding has now found its place and momentum in the general landscape of profitable financial investments.
Its attractive yield over short periods and its capped tax rate are the two main advantages. Reimbursements are ongoing and continue to attest to the sustainability of the model and the quality of the selection processes for proposed projects.
2019: a year of strategic choices for market leaders
While 2018 had already begun to concentrate activity in the handful of platforms, 2019 confirms this gap with the consolidation of existing leaders. In January, the TIKEHAU CAPITAL asset management fund acquired Homunity. This summer, it was Atland Real Estate’s turn move into real estate crowdfunding by acquiring 60% of the capital of a platform from the leading group.
These alliances have strengthened their position and legitimacy, particularly with national and even international promoters. In 2019, Homunity raised funds of between $1 and $2.5 million for two listed companies on several occasions.
On all 30 active platforms (generalist or specialized in real estate), the leading group is now narrowing down to 8 entities that account for more than 80% of the activity. With a total of $70 million raised in 2019, an increase of 183 % compared to 2018, Homunity takes the lead among pure players in real estate crowdfunding (with more than 20 % of the market share).
2019: the official entry into force of the PACTE law in France
Announced in 2018, the implementation of the PACTE law (law on the growth and transformation of companies) provided for new regulatory changes in favor of participatory finance. The two main measures expected were the opening of the PEA-PME scheme to equity financing securities (including bonds and minibonds) and the increase in the collection ceiling, which was $3 million (€2.5 million) for platforms with CIP status.
Adopted definitively on May, 22, the decree formalizing the new collection threshold of $8 million was not published until October, 28. On October, 31, Homunity opened the largest collection with $4.8 million (€4.4 million) for a tertiary operation in Seine-et-Marne, which is collected in 20 days from more than 800 retail and institutional investors.
The PEA-PME system for real estate crowdfunding securities will be more complicated to set up. Indeed, because of the costs related to the operation of the PEA-PME (different according to your banking institution) and knowing that the scheme is interesting if the investments are kept for at least 5 years (to benefit from the exemption), the interest for small portfolios is not so obvious.
2020, the year of crowdfunding for major real estate players and institutional investors
Not surprisingly, 2020 should continue the same positive trend. In the context of declining traditional real estate yields, crowdfunding remains an attractive alternative for individual investors who want high returns for short downtimes.
By the end of 2018, new real estate players had already entered the crowdfunding market. This trend was fully confirmed in 2019 with the arrival of national operators with much higher capital requirements. Throughout the year, the previous peak of $2.5 million was regularly tested to finance either major operations carried out by national actors or directly by the promoter in order to ensure its overall development plan. This structural financing will become more recurrent in 2020.
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First published in ideal-investisseur, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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