Research by the University of South Australia has revealed that crowdfunding can help would-be investors enter into property markets.
Dr Braam Lowies, lead researcher, said the study showed crowdfunding could provide first-time investors with the chance to get their foot in the door into the market.
Released in the Property Crowdfunding Australian Investor Perspectives 2016/17 report, developed in partnership with crowdfunding platform DomaCom, investors looking into property crowdfunding can expect a long-term investment, which offers low to medium risk and yields low to medium returns.
“There’s a lot of debate about the current state of Australia’s housing market, and its inaccessibility, especially first-time homebuyers who lack foundation capital get their first home,” Dr Lowies said.
“As crowdfunding works by pooling capital from a large group of people to purchase a property, both the dollar investment and the risk are spread across multiple players, with people able to make investments as small as $1,000.”
The study also showed property crowdfunding appealed to a range of demographics, particularly older Australians aged between 55 to 64 years old, which translates to 33 per cent of investors.
Meanwhile, only 4 per cent of respondents in the study were younger than 35.
“There’s definitely an appetite among older investors for property crowdfunding, but we also know that millennials are using this type of investment vehicle to enter the property market,” said Dr Lowies.
“While there are fewer millennials using crowdfunding for property investment, those that do tend to invest greater funds than their older counterparts.
“In contrast, older investors make up a greater percentage of the property crowdfunding market, but they tend to diversify their investment portfolios, preferring to hold higher percentages of their portfolios in cash and cash equivalent investment vehicles.”
The average amount of funds crowdfunded into a property was $14,623, with 75 per cent of investors investing $10,000 or less, and annual returns expected to be between 6 per cent to 10 per cent by the median of investors.
Dr Lowies added that while property crowdfunding is still in its infancy, it has the potential to expand through the acceptance of new digitalised investment platforms.
“It is an investment strategy that has the potential to revolutionise the property market,” he said.