There has been a surge of new crowdfunding platforms aimed at people who either cannot afford to purchase their own buy to let property, or wish to minimise their risk by purchasing only a share.
The UK Crowdfunding Association - a body set up by crowdfunding organisations to promote the business model and which now has a code of practice for new entrants - says 14 of its 40 members are recently-established property-focussed sites, either directly investment in individual properties or in related areas such as peer-to-peer lending.
Julia Groves, a representative of the UKCFA who gave the figures to the Sunday Times, told the newspaper that she anticipated larger companies would enter the crowdfunding arena in the near future.
For the moment one of the most successful crowdfunding property sites appears to be Property Partner, which is quoted in the newspaper as claiming it has raised £16m to fund its expansion programme.
Property Partner aims at individual property investors on a model adopted by a number of crowdfunding sites. It selects a number of properties and asks investors to put in a sum of money from £50 to £50,000 - there is a one-off 2.0 per cent fee and in return the firm arranges the purchase of the property.
The property is then let out with Property Partner keeping 10.5 per cent of the rental return; the rest is distributed proportionately in line with each investor’s commitment.
It says in the Sunday Times that it has over 6,000 users who have invested in excess of £24m.
Property Partner claims that traditional buy to let will shortly be unprofitable for many individual buyers and landlords thanks to reduced mortgage interest tax relief and other anti-private rental sector fiscal measures.
We have in recent months reported on new property crowdfunding sites such as Propnology and Crowdproperty amongst others.
The Sunday Times article makes it clear that crowdfunding is a young, still-evolving and largely-untested vehicle for investment, in property as much as in any other sector, and it cites research from the UK Business Angels Association that there may be a relatively high level of crowdfunded business failures.