New research commissioned by secured property lender Fitzrovia Finance reveals that over 3.4m people with savings and/or investments are considering using online property investment platforms for the first time but have yet to find one they like and trust.
The FCA is introducing new rules later this year to strengthen the level of protection for investors using investment-based lending platforms by providing tighter governance and more robust risk management systems. Fitzrovia Finance’s research shows that one in ten, or over 340,000 people with savings and investments intend to invest more through these platforms once the new regulation comes into force in December this year, and a further one in ten of existing investors claim they will use more platforms.
Recent criticism of the sector has deterred many investors from using property investment platforms, despite many platforms offering attractive investment opportunities that are clearly explained. Fitzrovia Finance’s research shows that overall, 27% of individual investors say negative coverage on the sector has deterred them from using these sites.
When looking at individual investors who are already using property investment platforms, 95% are considering increasing the amount they invest through them. The catalysts for investing more would be the need to diversify their investments, followed by the introduction of new regulations making the sector more transparent and safer, and becoming more comfortable with investing through property investment platforms.
|Catalyst for investors to invest more through property investment platform||Percentage of individual investors who use property investment platforms|
|Need to diversify investments/savings||67%|
|New regulations making the sector more transparent and safer||66%|
|Need to become more comfortable investing through the platforms||66%|
|Property becoming a more attractive asset class||65%|
|Secured property loans becoming a more attractive asset class||61%|
Brad Bauman, CEO, Fitzrovia Finance said, “Our research shows there is a significant number of individual investors who are looking for the right property investment platform to use. This is driven by attractive risk-adjusted returns in a low interest rate environment, and a desire for investors to diversify their investment portfolios.
This will only be enhanced by the welcomed new regulations coming into force later this year that make the sector more transparent and safer. This should intensify the spotlight on sites such as ours that offer lower risk property investment opportunities at attractive returns.
“However, property investment sites should not wait for the introduction of the new rules, they should be striving to make sure they are promoting the right investment opportunities at the right levels of returns and that the risks involved are clearly explained to potential investors.”
Fitzrovia Finance launched to institutional investors in Sep 2017, and in May this year it opened its door to private investors, who from an investment of £1,000, can benefit from attractive risk-adjusted returns of up to 5.5% p.a. These are derived from investing in loans to carefully selected property companies, secured on quality properties with first charge security and in excess of 150% asset cover. This means every £100 loan, is secured against £150 of bricks and mortar assets.
To date it has entered into more than £120m of loans, with no defaults.
Fitzrovia Finance focuses on providing investors, with the enhanced reassurance of a business built and run by a highly experienced, expert team operating a ‘7 Step Risk Control’ process developed over many years of experience and success in property lending. As a result of this, it rejects around 80% to 90% of loan requests and to date it has not experienced any defaults.
Through Fitzrovia Finance, private investors can now join institutional investors earning attractive returns currently up to 5.5% p.a. from secured property lending. Fitzrovia Finance’s lending is focussed on experienced residential and commercial property developers, with a strong record of successful projects. Typical loan durations are 12 to 48 months and the maximum loan to value is usually limited to 65% or less of development value, helping to further control risk.
Fitzrovia Finance competes with mainstream lenders, including the major banks, to lend money to established, experienced property businesses looking to borrow for projects of between £1m and £15m.