Frazer Fearnhead, CEO and founder of property crowdfunding platform The House Crowd and who recently appeared on BBC’s Dragon Den programme, discusses how the property market is currently outperforming the FTSE100.
Over the last sixteen years, average property prices in the UK property market have shot up by 45% (Source: Nationwide House Price Index), fuelled by the UK housing crisis. Conversely, the stock market has nose-dived by 5% (Source: Yahoo Finance) reflecting economic uncertainty. Since the beginning of 2015, this gap has widened significantly with the FTSE100 falling even further – so is now the time to invest in bricks and mortar?
Buy-to-let property investment offers investors a sensible and tangible way of securing their futures with generous returns. However, traditional buy-to-let requires a significant time commitment for liaising with tenants, managing property and ensuring that all of the correct boxes are ticked. Property investors have enjoyed a steady rise in house prices over the last few years and this is predicted to continue for the next decade. However, they’re feeling increasingly under attack by the reams of red tape introduced into the property market by the government, including the EU Mortgage Credit Directive and a rise in Stamp Duty on buy-to-let properties. In a recent survey commissioned by The House Crowd, over 70% of investors believed that these changes will have a negative impact on their investments. This degree of turbulence in the buy-to-let market is forcing some investors to look at other options.
Enter property crowdfunding. Crowdfunding is a modern way to invest in property, and has quickly grown to become a multi-billion dollar industry. It involves investors pooling their money with like-minded individuals via a web platform, then sharing the resulting rental income or capital appreciation. It is a hands-off approach which allows investors to spread their capital – and risk – over a number of properties. Individuals are able to invest as little as £1,000 and, if the right crowdfunding mechanic is chosen, will receive substantial returns on their investment as property prices continue to rise. Of course, as with all investments, there is risk involved. Anyone looking to participate in property crowdfunding should carry out thorough research and ask themselves the following questions:
– Will your investment generate good returns?
– Does the company have a track record of success and transparency?
– Will you be able to get out of the investment when you want to?
The future of traditional property investment is uncertain, as changes to government legislation and fluctuations in the stock market continue to dictate investors’ habits. Property crowdfunding offers returns which currently outperform the dismal interest rates offered by banks, and this combined with its hands-off approach makes it an attractive option to disheartened buy-to-let investors.
For more information, visit www.thehousecrowd.com
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