Spain’s Real Estate Crowdfunding Boom: Opportunity, Access, and Hidden Risks

Over the last decade, housing prices in Spain have risen by more than 80%, making homeownership an almost unattainable goal for millions of citizens. The real estate market, however, remains unaffected by this price increase, and the profitability of transactions remains high. Faced with the impossibility of buying a primary residence, let alone a second property to rent out or sell at a higher price, more and more people are opting to become landlords or investors through less traditional means.

“Previously, real estate investment was reserved for large capital and funds; now anyone can access projects for minimal amounts,” said Edoardo Corda, a real estate advisor. This change is due to the emergence of real estate crowdfunding and crowdlending platforms, which promise to democratize investment in property by offering higher returns than traditional financial products.

But behind the allure of real estate investment no longer being a privilege, as advertised by the first platforms, lies a real risk that not all participants are aware of. Manuel Carlos Merino, one of the few Spanish lawyers who have handled cases of affected investors, warns that “these transactions are considered high-risk investments; the return on capital cannot be guaranteed.”

“Our goal is to democratize real estate investment , allowing anyone to participate and diversify their portfolio,” explains Antonio Mañas, CEO of Wecity, one of the platforms operating in Spain. Despite the positive outlook, a lack of oversight, incomplete or confusing information, and a high concentration of risk among insolvent developers have led to defaults and legal disputes in other companies in the past. Given this history, current market platforms are establishing safeguards to ensure the viability of these new financing models.

Crowdfunding and crowdlending models in Spain

Real estate crowdfunding essentially involves bringing together a group of small investors to finance real estate projects. In the first examples of this type of operation in Spain, each project was channeled through a specific company, responsible for the purchase, renovation, and rental or sale of a property.

As Merino explained, “the company is created to buy and manage all real estate transactions. The rental profits are distributed among the investors, and when the property is sold, the company is liquidated and the remaining proceeds are distributed.”

With Law 5/2015 on the promotion of business financing in Spain, these operations had to adapt to a regulatory framework : the platform had to register as a Crowdfunding Platform (CFP) with the CNMV (Spanish National Securities Market Commission) and implement measures to protect small investors , including limiting the amount that savers without proven financial knowledge could invest. Following this change, some market players shifted their activity to crowdfunding through loans.

Crowdlending works similarly, but with companies or individuals requesting money on the platform. Agustín Vara del Rey, CMO of Civislend, describes the logic of his platform: “We connect real estate developers who need financing with investors seeking returns through loans backed by real estate assets.”

Returns of up to 13% in one year

Crowdfunding has taken off in Spain in its just over ten years of existence. By 2024, more than €1.2 billion had been channeled , placing it among the most dynamic markets in Europe, according to Wecity. Civislend believes this growth can alleviate the problems in the housing market “in a context marked by tighter bank lending and the urgent need for new supply .”

The main appeal of these platforms is their accessibility and the possibility of diversifying real estate investments without requiring large amounts of capital. “With just 50 euros, you can participate in a project that previously required hundreds of thousands,” explains Corda. “It’s a model that combines manageable timeframes, usually between 12 and 18 months, with average returns of between 10% and 13% annually ,” explains Civislend.

These platforms also stand out for their speed and flexibility in helping entrepreneurs secure funding. Fernando Gonzalo, from Hausera, points out that “since the 2008 crisis, there are many restrictions. They don’t finance 100%, they require a series of conditions…”. This makes it an ideal model for startups seeking agility, but Merino warns of the downside: “What you have to consider is why a company resorts to alternative financing. If I’m a solvent company and I need financing, I’ll usually go to a bank.”

On most of these platforms, investment is done entirely online through websites where small savers can find all the relevant legal and risk information. According to Civislend, the investor profile is increasingly diverse, but “typically falls between 35 and 55 years old , with medium to high financial knowledge and prior investment experience,” seeking diversification and simplicity in asset management.

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(Featured image by C Dustin via Unsplash)

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