Crowdfunding has snowballed into the mainstream market in recent years and has fast evolved “into one of those generational ideas, a thunderclap that promises to change capitalism indefinitely.” (1) However, it’s roots were planted long ago.
Crowdfunding began with many art forms, with “creators of literature, film and music relying on a community of investors” (1) to fund their talents. Alexander Pope, Mozart and even Shakespeare asked fans to provide financial aid for various projects, promising rewards like acknowledgements or manuscripts in return. (1)
Unintentionally, the Statue of Liberty was America’s crowdfunding pioneer. (1) When preparation for the statue’s delivery began, the US realised that a granite plinth for the statue was required, “costing around $6.3m.” Struggling to raise the funds, the US posted an advert in the New York World, “asking the residents of the city to donate and help assemble the statue. Attracting the attention of children, businessmen, street cleaners and politicians the money was raised with the majority donating less than a dollar each.” (1)
Carrying its power into the 21st century, the potential behind the trend was vocalized by musician Amanda Palmer, in her TED talk, “The Art of Asking.” After fighting her way off her label, she says, “I turned to crowdfunding. And I fell into those thousands of connections that I’d made, and I asked my crowd to catch me. And the goal was 100,000 dollars. My fans backed me at nearly 1.2 million, which was the biggest music crowdfunding project to date.” (2)
Transferred into the world of financial investments, “the application of sophisticated technology [can be] used and marketed to the masses, seeing crowdfunding platforms enter an array of industries.” (1) And now, we are witnessing the model change the face of property investment, because, in this day and age, home owning might be unattainable unless you can scrape together a substantial amount of money in the first place.
Traditional property investment often involves a sound amount of capital, expertise and knowledge of the market, rendering it somewhat exclusive. And according to Savills recent 5 Year Forecast (3), things are only going to get worse. Indeed, “it is becoming clear that the current conditions in the UK housing market are unlikely to be a temporary phenomenon,” with house prices in prime London set to increase by 20.4% in the next 5 years. (3) Thus, the opportunity to get on the property ladder in the near future could potentially narrow, especially for younger generations who might have to save for 121 years to buy a home in London. (4)
In addition, “buy-to-let investing — the obvious way forward — is a nightmare of administration. Think voids, demanding tenants and broken boilers. It isn’t easy to get into: you’ll need a deposit of around 25% to get a loan in the first place.” (5)
It’s this exact issue which property crowdfunding tries to solve. The premise is to create an environment for participation in home ownership, based on social change, inclusivity and fairness. By reimagining homeownership, property crowdfunding platforms may succeed in democratizing the property market. So far, crowdfunding has eased the way for artistic, architectural and financial endeavors. There’s no telling what the power of crowdfunding could achieve next. It’s certainly a sector of alt-finance to keep your eye on.
Written by Jenna Kamal
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