February 23rd, 2017

 

 

German Property Market finds Crowd-funding

In the US online edition of REUTERS, in a very informative article by Tina Bellon from Frankfurt called ‘Crowd-funding finds fanbase in Germany property market’, the growing number of German entrepreneurs turning to crowd-funding in the property industry,  are highlighted . “German crowd-funding proptechs (property technology firms) raised around 49 million euros in the first nine months of 2016, more than double the total amount for 2015 and also more than twice any other business sector, according to data from crowdinvest, an online platform tracking German crowd-funding.”

Crowd-funding is when a venture raises money contributed by a large number of people instead of through traditional bank loans. It is in fact a modern form of alternative financing and could be seen as a sort of an alternative finance ecosystem. It has been used to fund a wide range of entrepreneurial ventures including the funding of property markets.   Worldwide circa € 32 billion Euro were raised in 2015.

There is power in numbers, and the ability of savers to co-operate, unlocks opportunities which would otherwise have remained closed and inaccessible. It is in fact nothing less than pooling resources and sharing risk for a common good.

Crowd-funding is particularly suitable for Berlin &Germany

The Reuters article points out that crowd-funding is particularly suitable for Germany which attracts a new and younger customer base discovering the property market. With a surge in international interest in Berlin real estate, crowd-funding has provided another method for German themselves to participate in the market.

Germany has a lower home ownership rate than other European countries, and much lower than in Canada or the US. However the rate has been heading higher over the last 5 years, especially in Berlin, and oddly just the opposite has been happening in the US. 

Germany’s largest crowd-funding real estate platform is Hamburg-based Exporo, which has so far raised nearly 24 million euro. 

Anyone that has spent any time researching Berlin real estate market for example would see that when adjusted for income levels, Berlin property remains more attractively priced than almost all European country capitals and other international major cities. And this despite what has been a multi-year growth in German property prices.

According to CrowdfundingHub, a European Expertise Centre for alternative and community finance based in Amsterdam, “Real-estate crowdfunding shows a tremendous growth over the last year and with it comes along new platforms entering the market. Established platforms focusing on startup financing are developing new investment models as e.g. venture debts, crowd-voting or special purpose vehicles that allow a direct stake in equity. Real-estate crowdfunding shows a tremendous growth over the last year and with it comes along new platforms entering the market.”