Crowdfunding Expected To Replace Buy-To-Let

Jeremy McGivern, a Prime Central London property expert, has predicted that buy-to-let will be replaced by property peer to peer lending and crowdfunding, this is all because of the tax changes in the government that are choking the market.

As founder of search agency Mercury Homesearch, McGivern estimated the growth of crowdfunding will symbolise the biggest change to the housing market in the years to come, however, he gave a warning that it may possibly have a ‘catastrophic’ result.

At the Investec Private Banking’s event last week, McGivern answered the questions raised about the effect of the buy-to-let tax changes, including the commencement of the 3% stamp duty surcharge in April as well as the changes to mortgage tax relief from next year.

He said that investors might choose to go and invest in a crowdfunding rather than in a buy-to-let property, that gets around a lot of those issues. It is only natural to have a turn of events in such situations stating that “crowdfunding could heat up the market in the process.”

He also said that Property Partner is aspiring to become the London Stock Exchange for property, although it may be a terrible idea but he still thinks that “it will happen and it will become mainstream.”

With investments ranging from £50 to £150,000, people who have sufficient cash on their savings account now gain access to the market. It is expected that there will be a lot of investments amounting from £50 but it won’t make many changes. However, there will also be many individuals who will make investments ranging from £5,000 to £25,000, the problem is that their funds are still insufficient enough to buy the property they want.

So these people are going to wait for the market to go up and when it happens, that’s the time they’ll make their move. They’ll invest in crowdfunding sites, saving their money and waiting to get a bonus or a promotion, so that they can have the sufficient funds to buy the property that they are eyeing for.

Agreeing to McGivern’s point of view on the matter, Lee Grandin of Lend2Landlord (a peer-to-peer lending platform connecting landlords and developers to funders), said that it will be a “total disaster” for platforms such as P2P lending to allow or accept an investor who cannot make a right decision on what to do with his money.

He said that there is a difference between “supporting irresponsible lending and giving peer funders an opportunity to receive a better return.”

He added: “What you have to remember is that every Tom, Dick, and Harry exists in every asset class.” A fine example for this is when an investor, despite knowing that his capital is at high risk, but still investing more.

Risky investments should be assessed carefully and it should be only limited to your net worth. The problem is, no one can predict and order other people what to do especially when it comes to their money.

“There is only ever one message you can ever say and it must be said clearly and concisely: Your capital is at risk, You could lose all your money,” Lee Grandin said.

The Rent a Room mortgage of Bath Building Society, fitting for borrowers letting out part of their homes to guests on Airbnb, is also one of McGivern’s predictions that will become “mainstream like crowdfunding.”

“A year and a half ago I said banks and other lenders will take Airbnb income into consideration,” McGivern said.

“Bath Building Society had a first Airbnb mortgage this year – it was more of a PR stunt than a money-spinner – but that will become mainstream as the sharing economy is becoming more mainstream,” he added.