Italian real estate crowdfunding doubles funding in 2020

The Italian real estate crowdfunding has almost doubled the collection in 2020, financing 182 real estate projects, between equity and debt, with $78.8 million (€65 million), compared to $42.5 million (€35 million) in 2019 (+86.5%).

Real estate crowdfunding’s record collection occurred despite a slowdown in the second quarter of 2020 $12.7 million (€10.5 million), due to investor uncertainty related to the coronavirus pandemic and the resulting lower project offerings from platforms. The other quarters of 2020, however, saw steady market growth: $17.2 million (€14.2 million) in Q1, $20.5 million (€16.9 million) in Q3 to an all-time high of $28.6 million (€23.6 million) in Q4.

The greatest growth was achieved by real estate lending crowdfunding platforms, which raised a total of $43.7 million (€36 million) compared to $22.6 million (€18.6 million) in 2019 (almost triple), funding 163 real estate projects compared to 93 the previous year. Each campaign obtained the participation, on average, of as many as 255 investors, with a decreasing trend, however, in the last two years: 263 average investors in 2019 and 227 in 2020.

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The platforms that raised the most in 2020 are Rendimento Etico and Trusters

On the other hand, each investor invested an average of $1,700 (€1,400) per campaign, with opposite trends: $1,600 (€1,300) in 2019 and $1,900 (€1,600) in 2020. Each campaign obtained the participation, on average, of as many as 255 investors, with a decreasing trend, however, in the last two years: 263 average investors in 2019 and 227 in 2020.

The platforms that raised the most in 2020 are Rendimento Etico and Trusters, both launched in 2019, with a collection, respectively, of $17.7 million (€14.6 million) ($6.67 million (€5.5 in 2019)) and $9 million (€7.4 million) ($3 million (€2.5 in 2019)). The offering model of the two platforms is apparently different: while Rendimento Etico aims to fund fewer but larger projects (in 2020 it funded 33 projects for an average of $536,00 (€442,000), the second one instead aims to fund a higher number of projects (59 in 2020) of smaller size $153,000 (€126,000 on average). 

Rendimento Etico also launched and closed three ultra-million dollar campaigns in 2020 (two for $1.8 million (€1.5 million) and one for $2.55 million (€2.1 million), in contrast to the classic lending dynamics noted here. Among the other platforms already operating in 2019, Crowdestate raised $6.67 million (€5.5 million), Re-lender $4.25 million (€3.5 million), Housers $2 million (€1.65 million) and Recrowd $1.9 million (€1.57 million). All of them grew substantially over 2019, except for Housers, which declined sharply. As many as 4 new platforms entered the market in 2020, 3 of which closed at least one campaign: Bridge Asset, which closed 4 campaigns with $1.7 million (€1.4 million) raised, Valore Condiviso (2 campaigns for $273,000 (€225,000) and ItalyCrowd (1 campaign for $125,000 (€103,000). The first Build Lenders campaign, launched in December 2020, is still ongoing.

The growth of real estate equity crowdfunding was also disruptive in 2020: $35.5 million (€29.3 million) against $20 million (€16.5 in 2019 (+77%) for 19 real estate projects funded against 15. The average raise per project went from $1.33 million (€1.1 million) in 2019 to more than $1.8 million (€1.5 million) in 2020, with several campaigns, however, exceeding $2.43 million (€2 million) and two exceeding $3.63 million (€3 million) (both on Concrete Investing). The average duration is historically longer than lending, 26 months, although the trend is slightly downward (27 months in 2019 and 25 in 2020).

On the other hand, the average number of investors per campaign is comparable to that of lending, with 234 investments considering all campaigns from 2017 to date, but with a greatly increasing trend in the last two years: 193 in 2019 and almost 300 (296) in 2020. The average investment is also significantly higher than in lending: $9,400 (€7,800), but with a trend that discounts the increase in investors $10,600 (€8,700) in 2019 and $8,400 (€6,900) in 2020. The average annual return expected from real estate equity crowdfunding campaigns is higher than lending, 11.72%, where, however, the trend is growing (11.27% in 2019 and 12.13% in 2020). Faced, however, as noted above, with a longer duration.

The first two platforms, Walliance and Concrete Investing in 2020 raised 88% of the total. The former funded 10 projects for a total of 13 million, while the latter funded 5 projects for $15.5 million (€12.8 million).  The latter raised more on average (2.5 million on average), from a much smaller number of investors (860 in total) who, however, have the ability to make higher average investments $18,000 (€14,800 each). Some generalist equity crowdfunding platforms have also tried to offer real estate projects, although with mixed results. Mamacrowd’s only offer stands out, raising$3.3 million (€2.7 million), while CrowdFundMe and BacktoWork each launched one campaign in 2020, raising much less than the market average, $302,000 (€249,000) and $172,000 (€142,000) respectively. No new platforms entered the market in 2020, while the two launched in 2019, Build Around and House4Crowd were clearly affected by the uncertainties surrounding the pandemic, each launching only one campaign.

According to CrowdfundingBuzz, this year the collection of real estate crowdfunding will exceed $121 million (€100 million) thanks to the growth of the platforms that are already operating and a greater knowledge of the tool by developers, who increasingly appreciate its value of diversification of funding sources and that of marketing. The magazine is skeptical that so-called generalist equity crowdfunding platforms will be able to compete with specialized ones, precisely because the real estate market requires very specific skills. Finally, it is possible that the needs of NPL management will lead to the consideration of lending crowdfunding as a way of valorizing real estate assets, perhaps as an alternative to or in conjunction with real estate auctions. It is possible, therefore, that operators specialized in this type of activity may enter the market.

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(Featured image by PhotMIX-Company via Pixabay)

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