Development Finance Today posed the following question – are there too many property investment types? This was aimed at a variety of industry professionals, and the results reveal that 65% believe that there were too many property investment platforms in the market.
The increased diversity of property investment types
Property investment platforms allow investors to invest in individual properties or a property portfolio. CEO of Assetz Capital, Stuart Law, highlights the diversity of platforms available. “Property investment platforms have begun to sprout up over recent years in many guises. Crowdfunding, P2P lending, real estate investment trusts and bonds all feature in this market. Whether there are too many of them is a different question, and it probably comes down to whether there is a true market need for their services.”
We can see then that where a need for a property investment platform exists, there is always going to be a market for it. There are many different property types to invest in on top of this, examples including hotel room investments and student property investments.
Marc Trup of Property Management platform Arthur Online supports this, saying that “In any free market, demand attracts supply, more supply means more competition, which in turn means more options, better service and lower prices”.
However, does the amount of property investment platforms on offer make it hard for investors to ascertain how their investments should be made? Mr Trup goes onto say that “modern consumers are overwhelmed with choice, and in the complicated world of property investment – where poor choices can lead to financial ruin – a simpler world may actually be better in the long term”.
Although there are more options available that can lead to better service and lower prices overall, the competition can confuse investors.
Co-founder of Progressive Property, Mark Homer, adds to this argument, saying “there are probably now too many property investment platforms with disparate offers. As most will look to choose a strong operation with a strong brand – consolidation with a focus towards stronger operators is due”.
There could be a point to be made that, as with many industries, things evolve to meet the demands of modern consumers and the economy at the time. Henry Smith, CEO at Aitch Group, highlights that the property market is an ever-evolving landscape with new policies and legislation emerging frequently.
“To remain dynamic, exploring new investment models is an essential part. Provided the risk is calculated – at a sensible rate and there is no overexposure – the variation of investment platforms should be sustainable.”
What we can take from this is that although there will continue to be a diversity of investment platforms to assess, it is vitally important that you have done your own research. This will predominantly involve identifying low risk investment types, but also serves to highlight the need for reliable advice if you are unsure about an investment. There is also the existence of review platforms such as CrowdDD that provide investors with in-depth information on numerous real estate investment platforms. These websites help investors make informed decisions on where to commit their money so they can successfully reach their goals.
Why property investment is more popular
Property investment as a capital investment for private wealth creation is even more popular than it was before the corona crisis, as a survey by YouGov on behalf of Commerz Real shows. Since the lockdown, the decision to invest is more often justified with certainty.
More than half (56 percent) of people surveyed consider property investment a “sensible investment” for private wealth creation. In a comparable survey in February 2020, i.e. before the corona-related lockdown, only 51 percent of the approximately 2,000 respondents were of this opinion.
Whether before or after the crisis: property investment is maintaining its place as the most popular investment vehicle. In second place, gold received an approval rating of 38 percent (34 percent in February) in the current survey, followed by stocks with 32 percent. The securities lost their popularity in June compared to February (35 percent) – possibly as a reaction to the corona-related intermittent slumps on the international stock exchanges. Life insurance policies are relatively stable in terms of popularity, with 18 percent approval in June and 16 percent in February. Multiple answers were possible.
Property investment scores in terms of value and crisis security
For 49 percent of people, real estate is above all a safe investment, according to the June survey. Before the corona crisis, 45 percent of those surveyed said that. Since the lockdown, real estate has apparently also been considered crisis-proof among the population: More than a third (34 percent) of the survey participants cited this. In February, only 30 percent of those surveyed considered real estate crisis-proof.
A similar number of potential real estate buyers (30 percent in June, 31 percent in February) named the motive: “suitable for building up wealth”. Around a quarter of those surveyed see real estate as “protected from inflation” (24 percent in June, 22 percent in February). There does not seem to be a corona effect here Percent of private investors as an advantage of real estate (February: 20 percent). Multiple answers were also possible here.
Indirect property investment as an alternative
The survey participants were also asked about the obstacles they could expect when buying a property. Almost half (49 percent) named the necessary high equity as a hurdle when buying directly. 37 percent of Germans cited the fear of debt, and 34 percent of Germans consider the financial burden of paying off the loan to be an obstacle.
As YouGov and Commerz Real observe, indirect real estate investments – such as open real estate funds, shares in real estate companies or real estate investment trusts or crowd investing – are an “attractive alternative”. That’s what 41 percent of those surveyed said in June. In February there were almost as many at 43 percent. At 15 percent, open-ended real estate funds are considered the most attractive form of investment among alternative real estate investments.
