Recently BrikkApp was featured in Spanish publication, El Inmobiliario mes a mes, to discuss the effects of Covid-19 on the real estate market in Spain. You can read the full translated version just below. If you would like to read the original copy in Spanish, you can read it here on page 34.
Spanish real estate crowdfunding has shown its credentials during this time of crisis due to Covid-19. According to a report by BrikkApp, financing platforms have raised €172 million between the start of 2014 and the second quarter of 2020 to finance 508 individual types of real estate projects in Spain. This shows the potential that could be reinforced in these uncertain times when companies and individuals are looking for alternative solutions for investments.
"Real estate crowdfunding in Spain has raised a financial value of €171.77 million," says Jan Vecerka, BrikkApp CEO, who explains that, “The average capital raised per crowdfunding project comes up to €338,000, but we must consider the fact that the full project finances are much bigger, and crowdfunding represents only a tiny fraction of the funding.”
BrikkApp expects solid prospects for this shared investment vehicle: “Real estate crowdfunding is a very recent form of property investing, which has huge potential. Although the Spanish market has recently undergone difficult times, including the financial crisis, every crisis brings new opportunities. After 2016, there has been a growth of new platforms and some of them have become influential players in the European real estate crowdfunding market since then.” They also underline a fact that helps to understand the growth of this investment vehicle:
“Spain is the 4th biggest real estate crowdfunding market, as our data shows, just below the UK, France, and Germany.”
BrikkApp maintains an optimistic outlook, even with the current coronavirus crisis. They argue that “In comparison with other forms of investment, the real estate sector maintains its stability in the long term. Stocks, for example, have greater volatility and are much more affected by a financial crisis.”
They go on to state that, “Economic crises tend to have long-lasting effects on the way people handle their decisions, and even more when it is about real estate,” so it is difficult to make predictions in the short-term. Yet even with that, BrikkApp posits that crowdfunding will likely be a larger participant in the real estate market in the post-Covid era. They elaborate that they do not expect “[...] a big increase in the number of platforms in the coming years, but that the existing ones will raise a much greater amount of funding.”
Their opinion coincides with that of almost half of the experts who were consulted for the preparation of the 1st "Alternative Investment and Financing in the Real Estate Sector" study, carried out by IE Real Estate Club and Urbanite.
The study, which was made just before the start of the Covid health crisis, is based on quantitative and qualitative analysis of professionals in the Spanish real estate and financial sector. It is about new platforms that offer participative financing and the possibilities of development and investment. In the same study, 48% of the respondents stated that, in the face of a possible real estate sector crisis, crowdfunding platforms could act to make the sector more dynamic.
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A Banking Alternative
¨In a scenario when banking finance may be limited, especially for the real estate promotion business, any type of alternative financing source is especially necessary. If these platforms work well, they can be an interesting option to avoid the total stoppage of real estate investing, as occurred in the previous crisis¨, according to the opinions of those interviewed in the document.
57% of interviewees also stated that this investment vehicle will experience exponential growth. “[...] as it can be very helpful for projects that require financing, but whose conditions do not fit the ones required by institutional capital providers”.
To finalize, BrikkApp is lowering the barrier of entry for smaller investors to enter into the real estate investment landscape. For these prospective clients, it makes accessing the real estate market more possible. “They couldn't access [the real estate market] due to the high net worth requirements found in traditional real estate investing, and now, depending on the platform, they can diversify their investments and obtain benefits starting as low as 100€.” In conclusion, promoters will be able to obtain an additional funding source for their projects that previously didn't exist.
Adapted from the Spanish version of the article, which you can read here on page 34.