Real Estate P2P and Crowdfunding Leads Alternative Finance Industry
Cambridge University has published new figures, demonstrating that P2P lending for small and medium enterprises (SMEs) is helping to drive continued growth in the alternative finance marketplace. This, in spite of an overall market slowdown.
UK online alternative finance, according to the study, grew 84% in 2015, up from £1.74bn in 2014 to £3.2bn in 2015. Peer-to-peer lending, the report states, remains the “largest model by volume of the UK online alternative finance market”. During 2015, £1.49bn was lent to SMEs, a whopping 99% year-on-year growth rate. This brings the average growth rates for the sector between 2013 and 2015 to 194%.
At least £609m of the total peer-to-peer business lending in this period was lent directly within the real estate sector, in both commercial and residential developments, making it the clear leader in terms of popularity for online alternative finance loans and investments.
Real Estate P2P Most Popular Sector
“Looking across the range of the most funded industry sectors,” the report states, “it is no surprise that ‘Real Estate and Housing’ constituted the single most popular sector given the combined debt and equity-based funding for real estate amounting to almost £700 million in 2015.”
Real Estate & Housing was followed by Technology in second place, and Manufacturing & Engineering in third place. Overall, it was found, peer-to-peer real estate lending financed over 600 commercial and residential developments in the UK in 2015, mostly by small to medium sized property developers.
The report also looked into the equity-based crowdfunding market, and found that “equity-based crowdfunding is one of [2015’s] fastest growing models”. But exactly how fast growing? Up by 295% to £332m (from £84m in 2014). £87m of the total equity-based crowdfunding volume was in real estate crowdfunding.
Both UK and overseas reward-based crowdfunding was highlighted as “growing fast in transaction volume and popularity”. £42m was opened up in this way in 2015, a year-on-year growth rate of 62%.
Whilst other markets across the globe have acted cautiously towards alternative finance, the UK government has been extremely supportive of the online alternative finance market. This is clearly demonstrated by the move, this year, to allow P2P loan agreements to be included within the tax-free ISA tax wrapper. As a result of this, the study estimates that business lending for real estate platforms is likely to see a substantial growth in transaction volume, in excess of 50%.
Real Estate P2P and Crowdfunding In North of England
Interestingly, the report specifically mentioned the north west and north east of England. It points out the trend, in 2015 emphasising real estate crowdfunding in areas for regeneration. It states, “Regeneration areas are potential investment opportunities that will cost investors less than prime locations, and are likely to experience the highest levels of growth in coming years.” The report then goes on to note that the north east and north west are so lucrative as a result of having their economies transformed in recent years with the number of regeneration projects and development funding from both the private and public sectors.
Obviously, we at The House Crowd are pleased with the news that our sector is thriving so well. It appears that crowdfunding and P2P are really pushing out into the mainstream, which means more and more people are wising up to the benefits that our investment model offers.