To finance a real estate development operation or property dealers through a platform in return for payment, such is the concept of real estate crowdfunding. And this investment pays back ! For the year 2020, the sites of participative financing in real estate have served an average return of 9.3% according to the 5th edition of the Real Estate Crowdfunding Barometer, carried out by the platform Fundimmo and the project aggregator HelloCrowdfunding, and unveiled this Thursday, January 21st, 2021. According to the chairman of the board of Fundimmo, Jeremie Benmoussa, contacted by Capital, the study conducted among 32 platforms “shows a certain resilience of the model” of the “crowd immo”. Because in addition to the return delivered by the sector, up 0.1 point compared to 2019, all the indicators are green. Starting with repayments of $219 million (€180 million) in 2020 against $125 million (€103 million) in 2019 (+75%).
At the same time, the collection rose by 35% over one year, to $615 million (€505 million) Despite the economic crisis and the pause in construction sites during the first half of the year, followed by a gradual recovery from the summer of 2020, investors were on hand. “Their number has increased by 20% in 2020,” confirms Jérémie Benmoussa. At the same time, the average ticket has jumped by nearly 200% to $5,735 (€4,711) against $1,925 (€1,581) in 2019 and an entry ticket set at $1,217 (€1,000) on most platforms. A logical evolution according to the president of Financement participatif France, who notes that “the platforms have had to call on more professional investors, capable of injecting $121,000 (€100,000) on an operation,” to support the collection.
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An assessment of the crisis at the end of 2022
Another positive point is that the default rate was limited to only 0.16% last year, compared to 0.57% in 2019. The same trend was observed for late repayments, which were limited to 4.4% (-1.91 point compared to 2019) when they did not exceed 6 months and 5.7% (-1.99 point) beyond that period.
But beware: this photograph could be misleading and consider that the risk for the investor has reduced in 2020 erroneous. Indeed, as Jérémie Benmoussa points out, “the time between collection and repayment traditionally varies between 18 and 24 months. We will therefore observe the impact of the Covid crisis in a year’s time and by the end of 2022, we will have measured the full impact of the crisis”. For the director of Fundimmo, this impact should be limited but real, all the same. Delinquency rates could thus increase at least to the levels at the end of 2019 (respectively 6.41% for delays of less than 6 months and 7.69% for a longer delay) while the default rate would rise to 2% or even 3% in the next two years.
Towards a capital-guaranteed formula
Despite the expected increase in delays and defaults due to the Covid crisis, investors should continue to keep an eye on the sector in 2021, a year for which Jérémie Benmoussa is expecting an increase in inflows comparable to that of 2020. But the sector wants to go further. Based on the observation made during the first confinement that “the real estate crowdfunding attracts for the moment investors who are willing to take risks”, the 10 main platforms of the market, which account for 90% of the collection, have agreed to develop a new offer, based on the guarantee of capital for the investor. Launched in January with Marsh, a world leader in insurance brokerage and risk management, this new project should be completed before the end of the year according to Jérémie Benmoussa. He estimates between 2 and 3 million people are convinced to invest in real estate crowdfunding in the absence of risk taking. Vertiginous figures in comparison with the 100,000 investors who have so far participated in the campaigns that have been completed…
Sort and diversify
No more collections to come, therefore. But what about outlets? Questioning the needs of the real estate development market and the property dealers, the manager of Fundimmo is very confident: “At the end of 2020, the real estate crowdfunding addressed less than 800 real estate operators, on the 5.000 to 6.000 of the market”. The number of projects financed, that is to say 589 operations in 2020 (+8% over one year), should therefore still climb. All the more reason to be even more selective when placing your money on a real estate crowdfunding platform while waiting for the arrival of a guaranteed capital solution. Diversification, by betting on several projects, should also be one of your priorities to limit your risk taking.
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First published in Capital, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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