How the coronavirus is affecting the property crowdfunding market
By Jan Večerka, the chief executive and founder of BrikkApp
Though the coronavirus’ effects on many sectors have been well documented by this point, its impact on the real estate investment market remains cloudy, with many predicting a slight downturn in the short-term. On the other hand, the outlook for online real estate investment, something that was already increasing in popularity before the crisis, is a lot more clear.
Real estate crowdfunding is a trend that’s here to stay as investors currently using middlemen such as financial advisors or traditional funds have realized they cannot react quickly enough in turbulent times. Here is everything you need to know about the rise of real estate crowdfunding.
A rising trend even before the crisis
Any crisis scenario tends to put additional pressure on existing trends – and the coronavirus is no different. Crises force society to act, to shift to being more productive, and to change the entire structure of an industry.
We can look at past crises for example. The Great Depression, perhaps the most devastating economic crisis of modern history, caused an entire upheaval of outdated social policies in the United States, which eventually pulled the world out of recession. People – and more importantly, society – had to adapt or risk dying off. This is the same now as it was then.
So what does this mean for real estate? The general trend in every industry has been to go online – to create a direct relationship between customer and product. This is no different in real estate, which has been trending more towards cutting out the middleman and existing solely online in the past few years. Before the coronavirus turned the world upside down, the real estate crowdfunding market was expected to reach €900 billion in Europe by 2024. Because we’re still early in the coronavirus crisis, we don’t know how deeply the industry will be impacted, but the cracks are already there and this will likely lead to more investments being made online.
In fact, direct investment in real estate has been growing since the passage of the Jumpstart Our Business Startups Act (JOBS) in 2012, which allowed developers to find investors through the internet. It started in the US, then appeared in Europe soon after. It’s a fast-growing industry and the current crisis will only accelerate the trend.
Coronavirus is forcing all real estate online
The coronavirus is also having a major effect on traditional real estate, which has been forced to move all of its operations online. Virtual tours and open houses are on the rise as real estate agents adapt to the crisis.
Social distancing has made it impossible for real estate professionals to physically show properties and so agencies are increasing their use of digital tools – and more importantly, training their agents to use them. Technology is also improving to make virtual tours better and give those seeking to invest in the property a more complete view of what the property looks like before they invest in it.
Because the entire market is shifting online, this works in favour of the real estate crowdfunding industry, which is in a much better position to take advantage of any societal shifts online. This is especially true in these uncertain times, as people will likely have less money to invest with, and won’t be able to afford expensive properties. On the other hand, crowdfunding can be done with as little as €100, meaning that there will always be a market for it.
What online real estate could look like in the future
Besides virtual tours, the outlook for technology in the real estate world holds great potential. Real estate crowdfunding offers the perfect opportunity to take advantage of these technological advances as it is a technological advancement itself.
One of the major tech trends in property real estate is advancements in satellite viewings of property and land. This is crucial especially for development projects, where investors want to know the progress of a property. Latitudo40 is one such app: By turning satellite images into geospatial information, it is able to record real-time status updates and increase trust for the investors.
Big data and AI will also have a role to play in real estate. Using real-time data, investors will be able to get insights into pricing, home-value trends, and neighbourhood value in an instant, while AI will make it easier for users to find out information about potential property investments through chatbots and other automated systems.
We still don’t know what exactly the real estate market will look like as a result of this crisis – we don’t even know how long this recession will last. But one thing is clear: Online real estate investments are not a fleeting trend – in the coming years, these types of investments will only grow in popularity.