The rapid growth of fintech and proptech in Australia is revolutionizing the property finance industry. This growth is creating new opportunities for brokers to offer their clients faster and more secure financing options.
Austrade reports that the Australian fintech industry is worth approximately $45 billion and is rapidly growing. The industry is strong in areas such as payments, middle and back-office systems, neobanks, blockchain, and regtech.
According to the Proptech Association Australia, Australian proptech companies contributed over $1.4 billion to the economy and supported more than 5,700 jobs in 2023.
Fintech is challenging the traditional dominance of established financial institutions by introducing more agile platforms and diversifying financing options for brokers and developers. CrowdProperty is one example of a non-bank marketplace lender that leverages human expertise alongside technology to maximize investment potential.
The Role of Marketplace Lending in Property Finance
Marketplace lending is a type of peer-to-peer (P2P) financing where borrowers and investors connect through online platforms. Smaller property developers can use these platforms to request loans, which are then presented to a community of investors who can fund the requests based on their desired returns.
Investors can choose opportunities that match their investment goals, considering factors like interest rates, loan terms, risk, location, property type, and how the funds will be used. This system effectively meets the financing needs of various parties involved in property development.
Marketplace lending is particularly beneficial for smaller developers, as it provides them with direct access to potential investors and lenders, bypassing the limitations of traditional financial institutions.
CrowdProperty is a prime example of this innovative approach, using its online platform to connect borrowers with a wide range of retail and wholesale investors.
Marketplace lending has already gained substantial traction in other advanced economies, such as the UK. For instance, CrowdProperty has facilitated around $560 million in funding for over 3,000 homes valued at more than $1.25 billion as of July 2023.
Since launching in Australia in May 2021, CrowdProperty has achieved notable milestones, including over $570 million in small loan applications and the availability of $16 million in funding facilities. Its real estate debt investment fund has received a ‘favourable’ 3.75-star rating from SQM Research, making it a strong candidate for inclusion in the approved product lists of many financial advisors.
The Contribution of Diverse Capital Sources
Crowdfunding is often linked to marketplace lending, particularly for community-based projects or new products. However, its use in residential real estate development financing raises questions.
David Ingram, CEO of CrowdProperty Australia, explains that “the crowd” represents various sources of capital that accelerate funding speed and reliability. The UK version of CrowdProperty has shown the success of this model, quickly funding new projects through a diverse group of investors.
Ingram believes that by developing similar capital sources in Australia, CrowdProperty can offer smaller property developers the fast and reliable financing needed for expansion.
The Importance of Human Expertise
While technology enables unprecedented access to funding, the expertise of seasoned professionals remains crucial in property development finance. Although some fintech platforms prioritize tech solutions, the complexities of property financing necessitate human judgment and experience.
CrowdProperty’s competitive edge lies in its team of experienced real estate professionals with over a century of combined finance and development expertise. This knowledge allows the company to leverage technology to benefit both borrowers and investors.
The team carefully evaluates projects, approving promising borrowers who might be overlooked by traditional lenders. For investors, this expert review ensures that only worthwhile projects are presented, saving them time, effort, and the costs of due diligence.
Additionally, CrowdProperty’s experts provide valuable guidance to developers throughout their projects, increasing the chances of successful completion and reducing risks for investors.
Benefits for Commercial Brokers
Fintech-driven marketplace lenders like CrowdProperty offer significant advantages for commercial brokers, especially as the traditional financial sector grapples with ongoing challenges. Brokers can capitalize on these new opportunities to better meet their clients’ needs. A survey conducted by CrowdProperty revealed that over 56% of smaller developers see debt financing as a major hurdle to building more homes. Ingram notes that fintech marketplaces diversify the capital sources available for development projects, effectively addressing this critical issue.
CrowdProperty provides a wide range of property project funding options, including development finance, renovation finance, bridging finance, and development exit finance. The platform is adept at assessing unique situations and crafting customized funding proposals tailored to specific project requirements. By facilitating quick and convenient financing, supported by a team of industry experts, CrowdProperty empowers commercial brokers to deliver optimal financing solutions to their SME developer clients, thereby enhancing their overall service offerings.
