This year has been a wild ride, and it’s still not over. A real challenge was imposed on the property sector, which was severely impaired by the coronavirus pandemic. This led to a lower flow in deals, many job losses and suspensions of share redemptions. At the beginning of summer, we even saw the Prodigy network succumb to problems thanks to defaulted investments.
One has to ask, what will come in future times? Well, for crowdfunding, the future isn’t so bad. But, the months behind us definitely showed us the sector has to change to protect investors.
Lots of us have been saying this already – if another economic turmoil happens, we will need to change, since there are so many flaws in the business strategies and faulty methods. We couldn’t forecast the turmoil would be brought upon us by a pandemic, though.
Where do we stand now?
Property crowdfunding sectors have been put to the test in unforeseen ways. Moreover, job losses happened. The share redemption halts also showed us there are lots of problems to be handled. Platforms are doing their all to save money and sail through the disease-incurred problems, but some will not come out of this. This is normal for a growing industry that is faced with its first financial crisis.
The Covid-19 disease caused a drop in CRE transactions since valuations are being questioned and lots of sophisticated investment managers needed to pause investing in properties, since there are many unstable factors in the equation. Even though the crowdfunding sector has been impacted, things are not looking as dire as one would think.
Yes, great deals can be seen in all phases of the marketplace cycle. But, they are difficult to find in a peaking marketplace. And until the pandemic goes away, bonus problems impacting deals can be expected. Lots of deals can seem good on the first glance, but pros can see the faults in them. During the last few years, we saw lots of deals that didn’t align with lots of out deals, but were added on other platforms, and they have become even less desirable because of the pandemic. This is a true problem of such platforms – to stay in the game, they need to frequently offer deals no matter the marketplace sentiment, which puts you as an investor at hefty risk.
It is great to see the demand remaining the same in these times. But, the fundamentals incorporated even in the best deals have changed, so it’s crucial for platforms to do due diligence before offering the assets to the public at large. Thus, those who conduct their deals in a responsible manner resorted to warehouse offerings during the pandemic. Sure, lots of those deals sound goof, but the sudden shift the pandemic caused asks for more time in order to better comprehend how are some marketplaces affected.
Let us take this unprecedented time to look into the sector. We must analyze the rivals and competitors that sunk during these volatile times. The sector is non-existent without investors, so we must see what can be subjected to change for the benefit of current and upcoming investments. If we do this well, we can come out of this much stronger and make for bigger levels of trust among platforms and investors. We already saw some platforms adjust accordingly.
Property crowdfunding has the chance to assist sponsors in scoring significant ventures from the start by serving as a source of money, filling hole left by lenders that are not lending as much as they did before. We did see a jump in inbound inquiries from sponsors wanting to fund ventures, and some other platforms are seeing this, too. Also, we know that in past times that marketplace downturns can lead to distressed purchasing changes over times. Platforms that are in the position to invest in quality assets at the bottom of the marketplace can see a bright side of everything when the marketplace stabilizes.
We are not sure how long will the pandemic go on, but the demand for property investment will probably stay robust, since it is historically stable. If platforms wish to carry on sharing in the positive side of the worldwide property crowdfunding marketplace, which was estimated last year to reach nine billion by next year, we must put the end-user first.
While an increasing number of investors are seeking to bring up exposure to direct investment in properties in the new environment of the pandemic and the downturn as its consqeuence, the crowdfunding sector is at a turning point. The decisions that are taken in these times have the chance to influence a positive long-term outlook that will benefit investors and platforms. In certain ways, firms that have failed to do so can act as a warning sign that now is the time to work on the the sector’s foundation and standing to work on the trust in the investor fold. I know my colleagues are as passionate as I am about how crowdfunding has impacted — and carries on impacting — the whole property sector. That’s why I am sure the crowdfunding industry has a bright future ahead of it.