Crowdfunding exploded in 2015 and is poised to exceed its pace in the coming year. As 2015 came to a close crowdfunding surpassed it’s projected $2.5 billion mark, anticipated by Massolution’s 2015 Crowdfunding Report. With interest rates slowly increasing as the New Year begins, real estate developers are forced to leverage other strategies beyond traditional financing to help fund their projects. This scenario is driving the crowdfunding movement in real estate, and making it a win-win opportunity for both developers and investors.
With new platforms and rules allowing everyone to invest in projects, crowdfunding in 2016 should top $60 billion and exceed some conventional forms of finance. After analyzing these numbers it is very clear that real estate crowdfunding has grown extremely popular among investors. According to market statistics the real estate segment is the fastest growing crowdfunding market and in the last year it’s increased by 150 percent. With this in mind, here are some things we believe you can anticipate to observe in the real estate crowdfunding sector in 2016.
1. Real Estate Crowdfunding will exceed US$ 3.8 billion in 2016
Crowdfunding in 2014 for realty projects exceed 2013 numbers by more than 150 percent reaching US$ 1 billion. As 2015 came to a close the total for real estate crowdfunding exceeded US$ 2.57 billion thus signifying a 150% rise from 2014. If this pattern continues, real estate crowdfunding will exceed 3.8 billion dollars by the close of 2016.
2. The overall amount of Real Estate Crowdfunding platforms will surpass 250
As crowdfunding investments continue to explode so to does the amount of online platforms available despite industry predictions of consolidation. David Drake, Chairman of LDJ Capital, has estimated crowdfunding platforms may surge to 2,000 or more by early 2016. This number contains more than 250 solely used for real estate.
3. Legislation will continue to evolve
The very legislation that passed in 2012 and made real estate crowdfunding possible, the Jobs Act, has been modified many times. As more and more developers and investors flood the market the rules and regulations will have to continue to adapt. With the emergence of international contributors additional modifications may be necessary to maximize their impact. It’s realistic to assume that legislative modifications will continue to help evolve the market and play a substantial role.
4. The international market will get more involved
International investing will continue to grow in 2016 as other large players continue to get more involved. China itself invested over $20 billion in 2015 and this is expected to grow by 20% year over year. In 2015 more than 10% of all investment in American residential property was foreign investment. Crowdfunding will facilitate this further and accelerate this trend in 2016.
Real Estate crowdfunding in 2016 will be another year of record growth. As this industry continues to evolve, new platforms, projects and opportunities will drive it to new frontiers. As the battle intensifies between new and established platforms companies will focus on providing the most transparent and cost-effective investment experience possible. This outcome is a win-win for investors and developers as investors will feel compelled to invest more and developers will be able to find the financing they require.