Real Estate Crowdfunding Has Raised Over €45 Billion Worldwide

In Italy, the real estate sector became acquainted with the phenomenon of alternative finance linked to crowdinvesting with the birth of the first platform, Walliance, in 2017, when in the United States it was already a well-known and widespread system of access to financial resources.

In recent years, the phenomenon has continued to grow in popularity both among those who have chosen it as an investment solution and as a way to finance themselves.

In fact, according to the sixth Real Estate Crowdfunding Report, compiled by the research group of the Crowdinvesting Observatory of the Politecnico di Milano, led by Prof. Giancarlo Giudici and funded by Walliance, globally the sector boasts a cumulative collection of € 45.2 billion.

Thus showing great growth compared to the € 36 billion raised a year earlier, after the post-pandemic slowdown.

The crowdfunding platforms analyzed in the research, which includes only active ones, are 146, including 79 in the European Union, 24 in the United States, and 43 in the rest of the world.

Of these 39 platforms operate in equity, 91 offer lending investments, and 15 offer hybrid investment opportunities, which combine features typical of both lending and equity. This is the case, for example, with mezzanine debt, a form of debt that is subordinate to other loans such as bank loans, midway between debt and equity.

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Real estate crowdfunding in the European Union

At the EU level, Real Estate Crowdfunding (RECF) has raised about € 9.8 billion, including € 2.8 billion in 2022 alone.

The largest markets are France (with over € 1.3 billion raised in 2022), Germany (with a jump of € 629 million) and Estonia (€ 210 million). Italy is confirmed in fourth place again this year.

Most of the financing (87.9 percent) was dedicated to residential projects, and overall, it was found that European investors’ preferences fall on urban settings (58 percent) and new construction (64 percent), rather than renovation.

Compared to the total sample of 79 platforms surveyed, focusing the analysis on the 25 portals that collected the most significant figures shows that Germany’s Exporo is always at the top of the ranking, with a total collection that exceeds € 1 billion and that only one Italian platform, Walliance, is present in the ranking in 22nd place.

Depending on the opportunities granted by the regulations in each country, some RECF platforms have progressively adapted their service offerings, developing a secondary marketplace: their own marketplaces, through which users can sell and/or buy the shares and/or loans subscribed during the project financing campaign. The new ECSP regulations allow EU platforms to publish a “bulletin board” of buy or sell ads.

Real estate crowdfunding in Italy

In Italy, the real estate crowdfunding phenomenon is more recent than in the rest of Europe, but the growth of the market continues unabated, even and especially in 2022.

Platforms specializing in real estate have risen to 28, including 11 equity and as many as 17 lending platforms. The research identified – up to the date of 30/06/2023 – 1,113 successfully closed campaigns, which have raised € 434.92 million.

In the last 12 months (July 2022 – June 2023), exactly 500 campaigns were registered (of which 27 were equity and all others lending), and raising € 172.55 million, up 35 percent from the previous period.

The market share of renovations (87%) compared to new construction is consolidated, and 67% are located in urban settings.

From an economic point of view, it is interesting how much crowdfunding collection affects the total budget of real estate projects.

For equity portals, raising almost always represents a minority fraction of the budget; the average value is 28 percent and only in 4 percent of cases does the percentage exceed 75 percent. In 50% of projects in the last year this figure is even lower than 20%.

In lending, on the other hand, the percentage tends to be more substantial, because the size of the project is generally smaller: the average value is, in fact, 46% and, in 13% of the campaigns, the incidence of collection exceeds 90%.

Outlook for growth

The international economic situation, with rising inflation especially on energy and commodity costs (in addition to supply difficulties) and rising interest rates, does not seem to have held back real estate crowdfunding. Investors seem to appreciate the greater familiarity with the real estate environment (easier to understand than other crowdfunding projects) and the lower maturities.

In Italy the target is to reach a cumulative amount of just under €600 million, depending on the speed of authorization of the platforms (as of 01/08/2023 no Italian portal has obtained the green light from the national authorities)

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(Featured image by nattanan23 via Pixabay)

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First published in Crowdfunding buzz. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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