REIT ASIAPAC
At Minterest, being an intermediary, we believe that reputation and reliability are critical. Hence, it is important that our platform provides confidence to both the borrowers and investors. From the borrowers’ point of view, there is the availability of investment liquidity for their business funding needs and from the investor’ s position, there are quality offerings that would meet their return requirements.
Q
How does Asia Pacific’ s crowdfunding sector compare with those in the US and Europe?
Charis: Global Alternative Financing has seen massive growth: the sector has grown from infancy in 2005 to US $ 11 billion in 2013 to US $ 305 billion in 2018.
In the US, the market is mostly dominated by consumer credit platforms( 57 % of the US market share – mostly student loans / credit card loans), with an emphasis on institutional investments and emerging securitisation models. In 2017, 88 % of the market volume was funded through institutional investors or a total of US $ 37.6 billion. This is due to the relative maturity of the US market, where platforms can provide higher levels of product diversification.
Asia Pacific has a significant market share, given that China alone accounted for 71 % of 2018 global volumes. Excluding China, Asia Pacific accounted for 2 % of the market( US $ 6.1 billion), as compared to US which accounted for 20 %( US $ 61 billion) and Europe( including the UK) which had a 6 % market share( US $ 18.3 billion). Within the crowdfunding sector, there are numerous subsectors which include consumer lending, business lending, real estate crowdfunding, equity crowdfunding, and non-investment activities such as reward crowdfunding.
In Europe, there is also a strong focus on consumer credit platforms, although, in the UK, marketplace business lending is the dominant model, closely followed by consumer lending.
In Asia Pacific( excluding China), marketplace business lending is the dominant model closely followed by consumer lending. Established markets such as Australia and Japan have business lending transaction volumes above US $ 1 billion in 2018, along with Indonesia, which has a large consumer credit market. In the Asia-Pacific region( excluding China) as a whole, most investor activities were driven by individual investors rather than institutional investors.
From a real estate marketplace lending perspective, Asia Pacific( including China) has the largest market share at 44 % with a volume of US $ 2.5 billion in 2018. Europe follows with US $ 1.9 billion( 33 % global market share) and the US with US $ 655 million( 11 %).
However, equity-based crowdfunding for real estate is gaining momentum. The US is leading the market with a share of 60 % and transacted volumes of US $ 1.8 billion in 2018. Europe has US $ 865 million and APAC at US $ 258 million. Given that the real estate component of crowdfunding is still relatively small, there is potential for growth.
Q
What are your thoughts about the future of the crowdfunding sector in real estate? What are the implications of crowdfunding on the traditional means of owning real estate( i. e., acquiring physical property and investing in REITs)?
Charis: The global real estate market makes up more than half the value of all mainstream assets in the world, but it is extremely illiquid. We need to go beyond our mindset that we need to own real estate traditionally, i. e. buy a physical property and hold it for many years for capital appreciation. It may not be possible, given ownership restrictions, the huge quantum of investment required, property maintenance expertise, etc.
With advancements in technology and legal developments, real estate crowdfunding is increasingly popular with developers and investors, and it is redefining the way commercial real estate assets are bought, managed and sold today.
Many financial institutions, regulators and even governments are looking at related blockchain technologies. With that, we can create an active secondary market for the trading of real estate and open up new pools of liquidity for all. Being a forward-looking real estate investment company, we have a view of the future, that is, creating a blockchain token to represent a real estate asset will enable a new species of crowdfunding. A digitalised asset can be much more liquid, transparent, and secure than the existing paper-based asset infrastructure.
Q
What role does the acquisition of a majority stake in Minterest play in ARA’ s broader ambition in the global real estate credit business? What can we expect from Minterest in the foreseeable future?
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