Crowdfunding is gaining traction as a significant source of capital around the globe – and this new trend is becoming the latest property sector disruptor.
Traditionally, the only two ways to buy a property were to either pay cash or finance the purchase through a bond. Today this is changing, with crowdfunding entering the market as an alternative source of funds.
What is crowdfunding anyway?
The digital age has connected people from all corners of the globe in real time, allowing new partnerships to be formed across borders. One of the results of this is the newfound ability to raise money from investors all over the world and receive it swiftly through electronic payment methods.
Crowdfunding is a system of raising money from donors or investors online.
The system started out as a way for people to give to worthy causes and assist remote communities without having to go through a charity or NGO.
Recently, it has become a source of equity for businesses and investments – and that includes commercial property.
Are properties really being bought with online money?
While crowdfunding as a source of capital for property investment is relatively rare in South Africa, it has become main-stream in many markets overseas.
- Recently, foreign investors have been taking advantage of the drop in UK property prices in the wake of Brexit, using crowdfunded capital to buy and renovate properties for investment or resale.
- In some cases, these transactions have taken place entirely online, with no physical visit to the property whatsoever.
With the weaker Rand and some uncertainty about the political and economic situation in SA, adventurous foreign investors may seize the opportunity to invest in our commercial property sector.
If they do, crowdfunding may enter the market as a serious source of capital.
SA’s crowdfunding landscape – should traditional lenders be worried?
The South African crowdfunding market is still in its early stages, with websites like uprise.africa leading the charge.
However, there’s nothing stopping local or overseas investors from sourcing their capital using the considerable number of crowdfunding websites online to fund their purchases, except for the usual exchange control and currency regulations.
As this new trend gains ground, it may become a big disruptor in the local real estate sector.
Will crowdfunding be a great source of fresh capital or an unregulated lending nightmare? Only time will tell – but don’t be surprised if it’s here to stay.
No matter how you plan to finance your purchase, if you’re planning to invest in commercial property in the Cape Town area we are here to guide you through the process. Contact us today.