Generational changes and the idea of sharing.

The modern world has entirely changed in recent years (especially in recent months!). This is closely linked to the rapid development of modern digital technologies, which in turn have had a significant impact on changes in all areas of human life. They have affected people’s professional activity, as well as changes in the family, social relations and communication. The virtual world has become not only a source of access to information but also a way of spending free time and building social relations and self expression. Today, instead of meeting in-person, young people can use online chat platforms and video calls. Instead of going to the cinema, they watch episodes of ‘Connected’ on Netflix. Their lifestyle requires constant adaptation to new conditions. At the same time, they also expect a personalised approach, tailored to their needs and are not afraid to show their individuality.

The expectations of both Millennials and Generation Z are different from those of its predecessors, and the best summary of the changes that have affected our society in recent years is encapsulated by the slogan ‘the older generations lived to work, while Millennials work to live’. Why is there such a strong focus on these demographics? The reason is simple: It is estimated that by 2025, Millennials will make up more than 75% of the labour force of most developed countries. They are changing not only the modern labour market but also have a real impact on the economy. We can already see how they are changing society’s approach to issues relating to the sharing of various types of goods and services. We can therefore speak boldly of a revolutionary redefinition of the global economy. Thanks to an accurate response to the key needs of consumers, especially younger generations, the popularity of the sharing economy is growing exponentially. This is greatly influenced by technology, with smartphones at the forefront, which for Millennials are a natural extension of reality.

It is also estimated that the value of the sharing economy market will rise to USD $335 billion by 2025 in just five key sectors such as services, finance, transport, hotels and tourism. Equally impressive is the change in the approach to ownership: 81% of respondents of this PwC survey said that it is more profitable to use someone else’s goods than to own them, 57% think that the idea of accessing resources is an attractive alternative to the concept of ownership, and 43% say that owning resources is an unnecessary burden on the budget.

How does the economy of sharing affect the real estate market?

The real estate sector is also closely associated with the economy of sharing. According to this report from the European Commission, nearly 55% of the global population currently lives in cities. It is predicted that by 2050, this percentage will increase to 68%. Combining this data with the fact of an ageing population, it is clear that the real estate sector mainly impact younger generations. Mass urbanisation poses many challenges, and one of them is undoubtedly the shrinking living spaces that neglect the social needs of urban populations. One answer to the question of where 9.6 billion people can be accommodated in 30 years is coliving.

Ensuring reasonable rental prices and finding other forms of housing are crucial issues in discussing the problems of young people around the world. Through the development of the coliving sector, it is possible to support young people entering the labour market, who have thus far lived with their parents, singles for whom it is too expensive to rent a whole flat, and people living in the suburbs, for whom it is uneconomic to travel to university or work every day. Coliving also has the potential to bring back more authentic forms of connection, which have recently been dominated by mostly virtual kinds of relationships.

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The potential of crowdinvesting.

Crowdinvesting is also an ideal solution to respond to these trends, as it is an interesting method which allows demand and supply to be met more easily through community investment in real estate. Equity crowdfunding provides an opportunity for collective investments into profitable development projects, which would often be unachievable for individual investors due to high entry thresholds. Investors who are open to new challenges connect via online real estate crowdfunding (RECF) platforms such as Social.Estate or Prodigy Network and join together to finance the chosen investment. These platforms, therefore, play the role of a platform that not only selects and verifies properties carefully but also helps investors complete all formalities and gather constant insights into their assets. It can, therefore, be said that social financing allows small investors to finance large projects without having to take out loans.

The equity crowdfunding model of real estate has been growing around the world for several years and is continually gaining new supporters. RECF reduces fees and allows investors to choose specific assets to help them implement their investment plans. Besides, RECF has evolved as a cost-effective tool to enable people to finance quality real estate assets. All these aspects will contribute to the development of the industry. According to data published by The College Investor, over the past two centuries, 90% of the world’s millionaires have owed their success to real estate investment. Today, more and more people have the opportunity to tap into these profits, thanks to crowdfunding. This situation is influenced not only by the turbulence in world economies but also by the popularisation of group financing of various projects. To explain a bit more about the benefits of equity crowdfunding in real estate, here are a few advantages that the model provides:

• Ready-made solutions: the properties offered for investment are thoroughly verified, which makes the security of the transaction high.
• Less money, less risk: crowdfunding financing enables investors to invest capital in several properties. If one of the projects does not bring the expected income, the losses will be offset by other investments.
• Transaction security: by investing in real estate through crowdinvestment platforms, we become shareholders in dedicated companies for a given project. Thanks to this we can be sure that the money invested will be allocated to the selected property.
• Easy exit: thanks to RECF, investors can exit at any time, selling shares to a third party in a much shorter time and with much less effort than traditional investment deals. In this way, investors can retain more financial liquidity.
• No need to handle leases: in a crowdfunding model, investors do not have to manage properties directly nor solve all maintenance and tenant problems. As a result, this form of real estate investment boils down to a payment of capital and expectation of profits.
• Global opportunities: thanks to crowdfunding, it is possible to invest in properties anywhere in the world. As an investor you just need to choose a country and specify the nature and scale of the investment you want to make.

It should be added here that crowdfunding emerged in the context of the global financial crisis that occurred in 2007-2008. At that time, many banks collapsed or lost liquidity and access to credit was limited. Small and medium-sized property developers, therefore, faced difficulties in accessing financing from institutional banks. In this situation, alternative funding sources began to fill the financing gap and crowdfunding gained in popularity.

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Today, the real estate market, all the more so during the ongoing pandemic, should be open to technological innovation and the introduction of new projects using the Internet of Things (IoT) solutions. This will ensure stable development and attract new buyers, including from younger generations. We can already see this trend - in the crowd investment model, not only are residential flats being developed, but also hotel facilities and student dormitories. By leveraging modern information technology and online competencies, RECF platforms have “streamlined” the process of financing real estate, making it significantly quicker, easier and more efficient than traditional financiers. In this way, more and more buildings for rent may appear on the market. Among some, this raises a number of controversies, due to the rotation of tenants or the displacement of native residents and service facilities. Certainly, these issues require the introduction of legal regulations to ensure that the properties financed in the crowd investment model serve the local community first and foremost.

The growing popularity of the rental sector, which is forecast to double over the next decade, in addition to the social phenomena mentioned above, is a straightforward way to popularise coliving. This is also a clear signal to investors, for whom the sharing economy has much to offer. By starting to invest in the real estate market using a crowdfunding model, they have a real chance of increasing their passive source of income. Thanks to equity crowdfunding, investors can profit from a quick investment lever and sell coliving properties profitably within 3-5 years or treat them as long-term investments, assuming a stable revenue growth over a period of even 20-25 years. An example of this kind of investment is the first RECF campaign in Poland, which raised PLN 300,240 PLN of capital on the shareVestors.com platform. During the campaign, 300 shares worth 1112 PLN each were sold.

More importantly, these are also low-risk investments. The fluctuating economic situation is of little importance here: on the contrary, the demand for housing within this social group is high, and demand far exceeds supply. Crowdfunding, as an alternative form of funding for coliving projects, also brings other benefits such as visibility and marketing publicity, which in turn attracts millennial representatives interested in renting.

The residential and social housing sectors will require large private investment over the next few years in the face of reduced government spending or problems with bank financements. Co-operation and co- existence will enable alternative housing models and it seems very likely that the definitions of the housing sector as we know it today will lose relevance to ‘co’ projects.

For this reason, Social.Estate has joined forces with Spatial Experience to democratise investing in coliving through crowdfunding. The result of this cooperation is a solution that, by leveraging sharing economy principles, connects coliving developers and operators with individual investors to fund new coliving projects. It is a modern way to start building the community from the earliest stage of brand and property development.

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