The latest proptech and fintech innovations are having a transformative impact on the world of property finance in Australia, presenting opportunities for brokers to provide clients with fast and secure access to finance.

Both fintech and proptech have emerged as boom industries in Australia’s innovation economy. Austrade figures indicate the Australian fintech sector is a fast-growing $45 billion giant, with strength in payments, middle and back-office systems, neobanks, blockchain and regtech.

As of 2023, Australian proptech companies accounted for over $1.4 billion of direct economic output and supported more than 5700 jobs each year, according to figures from Proptech Association Australia.

By disrupting the status quo of dominance by traditional financial institutions, fintech is diversifying the financing options available to brokers and developers to encompass newer and more nimble platforms.

One such platform that fully embodies the transformative impact of fintech is CrowdProperty – a non-bank, marketplace lender that uses human expertise to fully capitalise on the potential of technological innovation.

Why marketplace lending is transforming property finance

Marketplace lending is one fintech innovation that stands to have a major impact on the world of property finance. It brings especially strong benefits to players like commercial brokers, by enabling them to provide clients with access to quicker and more convenient forms of finance.

Also referred to as peer-to-peer (P2P) lending, marketplace lending involves the use of online platforms to connect borrowers in need of funds with investors and lenders seeking to earn returns.

Borrowers — in this case, small-to-medium (SME) property developers — submit loan requests to online platforms, which, once approved, are then offered to the community of investors who can choose to provide funds for a target return*.

Investors can select which lending opportunities best suit their portfolio needs based on criteria such as interest rate, loan terms, risk, location of development, development type and use of funds.

For the property development ecosystem, the process is a highly effective means of addressing the pain points and financing needs of multiple parties.

Marketplace lending dramatically enhances the ability of developers – especially small-to-medium players – to tap funds, by giving them direct access to potential investors and lenders. This overcomes the long-standing inability of traditional financial institutions to fully cater to their needs.

Marketplace lending can also bring tremendous advantages to commercial brokers, giving them the ability to facilitate financial access for clients.

An example is CrowdProperty, which uses its online technology to give borrowers access to a diverse range of investors at both the retail and wholesale levels.

For all these reasons, marketplace lending has already proved massively popular in other advanced economies such as the UK.

In the UK, CrowdProperty has provided around $560 million in funding for the construction of over 3,000 homes worth more than $1.25 billion (as at July 2023).

CrowdProperty Australia was launched in May 2021, and in just two years has achieved some major milestones. These include attracting over $570 million in small loan applications and making $16 million in funding facilities available.

Its real estate debt investment fund obtained a ‘favourable’ 3.75-star rating from SQM research, making it a strong candidate for inclusion on the approved product lists of most financial advisors.

What the ‘crowd’ brings to marketplace lending

The term ‘crowdfunding’ is also sometimes used in marketplace lending contexts. While this is common for small fundraising campaigns for communities or new product innovations, it can raise questions when it comes to residential real estate development finance.

CrowdProperty Australia CEO and co-founder David Ingram said the crowd is simply a way to think of diverse sources of capital.

“Our UK sister company funds new project loans in a matter of seconds on the platform,” Ingram said.

“This happens as they have over 19,000 retail investors making small investments into projects, alongside high-net-worth investors, and a series of institutional investment partners backing projects to the tune of hundreds of thousands and millions of pounds.

“We’re building the same diverse sources of capital in Australia which is what provides the speed and certainty of funding we know brokers and developers are looking for. SME developers can truly grow their business faster with speed and certainty of finance and by working with specialist finance partners who are experts in smaller-scale developments.

“It’s this combination that makes brokers want to bring their best quality projects to finance with us.”

Human expertise remains essential

While technological innovations empower developers to access funds with unprecedented speed and convenience, the real-world expertise of real people remains an indispensable part of the process.

While some fintech-driven platforms rely solely on their tech offering, in the complex world of property development finance there’s no match for real-world experience and expertise. Platforms still require the wisdom of human beings to engage in effective decision-making.

For this reason, CrowdProperty’s key advantage lies in its team of veteran real estate experts, who collectively possess over a century’s worth of experience in finance and development.

This enables CrowdProperty to best leverage the technology at its disposal to maximise the benefits for both borrowers and investors.

When it comes to providing funds, CrowdProperty’s team is able to conduct expert assessments of projects, giving the green light to promising borrowers who would otherwise be neglected by non-specialist lenders such as banks.

For investors, this ability to perform expert scrutiny and assessment means CrowdProperty only offers them solid projects, while also saving them tremendous time, energy and money by conducting due diligence on their behalf.

CrowdProperty’s team of experts can also provide critical advice and assistance to developers throughout their projects, which benefits all parties.

It improves the ability for borrowers to successfully complete their developments as originally intended, while also reducing risk for investors by ensuring that they reap the full rewards for their funding on time.

The advantages for commercial brokers

For commercial brokers, the tremendous advantages offered by fintech-driven marketplace lenders are immediately apparent. This is especially the case with specialised platforms like CrowdProperty, which offers financing both direct and via brokers.

As with any sphere of business, it’s essential commercial brokers offer a full set of high-quality services to their clients to attract and retain business.

Given the continued limitations of the traditional financial sector, one of the biggest pain points for members of the Australian property sector at present is the ability to access funding. Over 56 percent of respondents to CrowdProperty’s white paper survey of smaller developers said debt financing was their biggest challenge to building more homes.

“The advantage of a fintech marketplace is that it brings new and diverse sources of capital to finance the development projects of clients,” Ingram said.

“Combining this with the expertise of the CrowdProperty team means we can offer a full suite of property project funding, catering to all your project finance needs at any stage of the project including development finance, renovation finance, bridging finance, and development exit finance We will review any situation and can develop blended products or customised funding proposals based on the specific needs of a project.”

No project is too complex for us. CrowdProperty is committed to helping commercial brokers by giving clients the ability to tap quick and convenient financing supplied by a team of industry experts.

As experts in the property development sector, CrowdProperty empowers brokers to provide the best financing options to their SME developer clients. Click here to learn more.