Real Estate investments have long been an untouched island in an investment world otherwise transformed by technology.
Investors have been limited in their ability to target and diversify tailored real estate investment portfolios.
The financial technology revolution
Yet financial technology, or fintech, has recently found itself in the spotlight of US and European Venture Capital investment. An antiquated retail banking system has seen itself recently transformed as fintech challengers have appeared in sectors such as remittances, payments and also loans.
Global fintech venture investments stood at $12.2 billion in 2014 ($1.48 billion in Europe), tripling from $4.05 billion in 2013 (Accenture). While many of these startups focus on core banking products such as foreign exchange, card payments or consumer loans, relatively little attention has been drawn to investment services.
This is a tremendous opportunity for the right ideas. “Buy-side” platforms are few and far between. The likes of Nutmeg have sprung from the ground within a couple of years, raising $37m to help cut out the middleman. Through a user-friendly, technology-based, transparent platform, Nutmeg has been able to introduce investing in the markets to a new audience.
In the world of real estate investment, the best opportunities and the best services have long been the reserve of a closed network.
This network has been able to draw on a large pool of financial backing, leaving the everyday investor unable to gain access to these type of investments.
How real estate investment services can evolve
By bringing together knowledge and understanding of real estate investment and online technology, it is clear that real estate investment services can gain from the fintech treatment.
The trick is not to lose the quality of a skill-intensive service in the process, especially when you are providing access to direct investment.
Investors should be able to benefit from a full range of direct real estate investment opportunities and easily build their portfolios online through a transparent, data-driven approach.
The plethora of alternative investment platforms that have come to market in the last few years has really captured the imagination of investors.
Certainly real estate investment services could see positive change from using sophisticated online platforms that go beyond a pure marketplace for investors and financial products.
Real-estate ‘crowdfunding’ at large was a $1 billion industry in 2014 and is expected to grow to more than $2.5 billion this year, according to a report released this week from industry research firm Massolution.
What is the solution for Europe?
US-based firms like Fundrise or RealtyMogul offer a platform more akin to online brokerage services, directly linking real-estate developers and investors.
While this model is well suited to the US and its regulatory twilight zone, it cannot reasonably be mimicked in Europe.
Building a pure marketplace for real estate assets adds little value – instead I believe the emphasis will likely reside in providing a full range of real estate investment services to help users manage their portfolio and make informed decisions.
This may well prove to be where the crowds ultimately flock.