By Uma Rajah, CEO and co-founder of CapitalRise
The alternative lending market has grown exponentially over the past decade, establishing itself as a convenient and dynamic new source of funding as an alternative to traditional bank lenders. Following the rise of crowdfunding platforms for both individual and business borrowing, and the establishment of this sector as a new opportunity for investors, several specialist platforms have entered the property lending market, arguably one of the most outdated sectors in finance.
CapitalRise is the UK’s only dedicated Prime property finance lending and investing platform, providing bespoke, flexible finance solutions to property developers in Prime Central London locations, such as Chelsea, Mayfair and Belgravia, Prime Outer London locations, such as Wimbledon, Richmond, and Hampstead, and Prime Home Counties locations, such as Hampshire and Surrey.
The platform has revolutionised old-fashioned manual processes for investors and borrowers in the Prime property sector by combining proprietary fintech technology and expertise in the property market. It offers high net worth and sophisticated investors and institutional investors access to invest in high quality Prime property in London and the South East, an attractive investment class that was previously only accessible to Ultra High Net Worth (UHNW) individuals and institutions.
There are several drivers behind the rise of investing in Prime property:
- The resilience of the Prime market:The Prime property market has been resilient throughout the pandemic and is forecast to grow again this year, with latest figures showing that house prices in Prime Central London grew by 0.5% in the three months up to June 2021, the largest quarterly rise since August 2015 * (Knight Frank). The market is also adapting to changes created by the pandemic, such as developers meeting the demand for repurposing Prime property assets from one class to another, and increased buyer demand for residential properties with more space inside for home offices and access to green space.
- The advent of fintech in the property finance sector:This has enabled specialist platforms to extend access to the prime sector of the property market to eligible sophisticated and high net worth investors, an incredibly attractive asset class that was historically only ever accessible to institutional investors and UHNW investors, as the minimum investment amounts were in the millions.
- The quality of the technology available with platforms like CapitalRise: It starts with a fully digitised investor onboarding process, with automated KYC and AML checks and touches every other part of the investment process so that every investor can manage their investments online including opening a CapitalRise Innovative ISA (for those seeking tax free returns) , transferring in ISAs from other providers, monitoring the performance of their investment through to redemption of the investment. This provides a smooth, seamless service which can be managed by investors with ease and clarity at every stage.
- The returns: While still new players in the property finance market, specialist alternative finance platforms that are committed to a responsible approach to lending and apply meticulous selection processes to funding applications, have proven their ability to deliver strong returns to investors. At CapitalRise, their innovative prime property finance model and strong due diligence has delivered a track record of zero investment losses or investment defaults and has returned over £50m to investors since inception, with an average return of 9.2 per cent per annum.
- The attraction of fixed income securities: CapitalRise has recently seen a surge in demand from investors. Investing in Prime real estate debt provides potential returns that are fixed, rather than variable, which is particularly attractive at a time when equities are volatile. The comfort of knowing that investments are backed by Prime real estate assets at low LTVs, currently 62% on average, provides attractive downside protection for investors.
- The increase in wealth as a result of the pandemic: Sophisticated, eligible investors are increasingly looking to Prime property platforms like CapitalRise as an intelligent, rewarding way to invest. And with 51% of the UK’s High Net Worth Individuals reporting that their total wealth increased overall as a result of the pandemic (Knight Frank Wealth Report), we could see even more people choosing to do so in 2021 and beyond.
To best take advantage of investment opportunities offered by alternative lending platforms in the Prime property sector, investors should look for high quality developments, high quality and carefully structured loans, and a high quality team with substantial experience and knowledge of the market. With these three tenets, investors can reap the rewards of an exciting opportunity to invest in Prime property with strong risk adjusted returns.
