Crowdfunding, millennial buyers and higher mortgage rule real estate in 2017

By @fangurlmary on
Real estate predictions are based on the growth of crowdfunding sector
Real estate predictions are based on the growth of crowdfunding sector in the market. Jose Martin/Unsplash

For the past year, real estate experts have been pinning their hopes on crowdfunding as one of the most defining aspects of the property market in 2017. Their predictions were based on the explosive rise witnessed in the contemporary real estate crowdfunding sector, which shot to US$3.5 billion (AU$4.74 billion) last year from a modest US$19 million (AU$25.71) four years ago. Further growth is expected this year, elevating realty crowdfunding as the most prominent alternative finance option worldwide.

Real estate crowdfunding a win-win for both developers and investors

With interest rates moving up and banks posing unfavourable lending conditions, developers are increasingly looking beyond conventional financing to support their projects. Real estate crowdfunding has come to the rescue. Thanks to the recent implementation of Title IV of the JOBS ACT, numerous crowdfunding platforms may now accept investments from non-accredited investors, along with accredited ones. The new legal amendment has duly broadened the horizon of investment in real estate, creating a win-win situation for developers and investors. Now, there are nearly 100 real estate crowdfunding platforms in the USA.

Interestingly, real estate crowdfunding is not limited to the US market. It is actually one of the hottest trends in the overall global realty market today. Realty crowdfunding platforms are continuously being launched in the UAE, Asia and even Egypt. In fact, a leading Singapore-based realty crowdfunding platform recently raised around S$1 million (AU$0.98 million) in the first funding round for a company.

The amazing part is that real estate crowdfunding enables investors to try their luck with as little as US$5,000 (AU$6,770), assuring opportunities for both small and new investors. Moreover, most of the crowdfunding platforms now cater to investors in any part of the world. This means that a budding investor in Japan can easily reap benefits of stable US real estate by investing in one of the latest cutting edge developments in Dallas or NYC.

“There is no question that the introduction of real estate crowdfunding has allowed smaller investors to participate in exciting real estate projects in all corners of the globe. It takes less than US$6,000 (AU$8,118) to step into the market and enjoy high yields up to 20 percent, if not more," stated Jack Boyajian, the CEO of ENDVEST. Based in New York, the company is a leading investment portal focusing on systematic real estate investing.

The online nature of crowdfunding platforms is another huge reason behind the pronounced rise of real estate crowdfunding as of late. Using online platforms, one can do a lot in only a few clicks or swipes from the comfort of their home.

Millennial buyers gaining prominence in 2017

If crowdfunding is the signature trend of real estate in 2017, the rise of millennial home buyers is a close second. The oldest millennials are now in their mid-30s and are planning to have their own houses. Marriage is on the cards for most of them, further creating the urgency for a new home. Most jobs have been designed for the 25 to 34 age bracket, with wages happily rising. Overall, it is a highly favourable situation for millennials to think of a new house this year.

According to realty gurus, these millennials are mostly interested in investing in the Midwest. The five hot favourites are Madison, Columbus, Nebraska, Des Moines and Minneapolis.

Higher mortgage rates

Mortgage rates in America hit a record low (below 3.75 percent) in 2016 but rose to 4.24 percent - 4.3 percent in December 2016. Finance experts and realty pundits have forecasted around 4.2 percent on average throughout 2017. The rise in mortgage rates is due to investors increasingly selling off their bonds after the presidential election last November. After Trump rose to power, investors began to worry about hiked taxes and infrastructure spending that could result in bigger deficits in the federal budget.

However, market experts have stressed that home buyers would need not worry about the recent rise in mortgage rates. "It’s true that mortgage rates have rose up from last year yet 4 percent is still affordable. And it’s going to shoot up any further for the time being. So, homebuyers can happily think of their new homes," a certified financial planner stated.

On the other hand, the recent Brexit fallout has had a major impact in the contemporary real estate scene. With UK realty currently going through an uncertain phase, the US real estate scene is fast hogging the limelight in the global property market. The Chinese market, too, is currently moving along a slow tide, which presents an advantage for US developers. The American commercial real estate is to benefit in particular, and speculations are on the rise about steady foreign investments in the country.

The US property sector is reputed for being the most transparent and stable in the world, topped by relatively better yields. With Europe and China realty markets slowing down, it is likely that international investors would seek greener pastures in the United States.