Can fractional investment really get you into the property market sooner?
Fractional investment has long been thought of as an easy way of getting into property investment, but a recent report has put that belief under scrutiny.
The Fractional Investment in Residential Property in Australia report, prepared by a joint partnership between the University of South Australia and fractional investment company BRICKX, analyses a sample group of fractional property investors to understand how these investors operate.
Lead researcher Dr Braam Lowies said that this tech-based investment method has paved the way for Millennial interest in particular due to growing with consistently rapidly evolving technology, as the report showed that 44 per cent of fractional investors were aged between 18 and 34, and 37 per cent were aged between 25 and 34.
“Technological advances have created new investment opportunities in the online environment, many of which naturally appeal to the younger generation,” Dr Lowies said.
What Dr Lowies claimed was the most interesting thing discovered through the report was that fractional investors do not see it as a method of entering the property market.
“Rather, it is used as a substitute savings vehicle that offers slightly higher returns in line with the capital growth offered by the underlying residential property asset,” the report stated.
This claim was made at odds by BRICKX CEO Anthony Millet, who does see fractional investing as a means of getting into the property market.
“It’s expensive to be able to buy property, it generally leaves you undiversified, it’s a liquid, lumpy asset that are hard to buy and sell easily, and there’s all the hassles with property management,” Mr Millet told Smart Property Investment.
As an alternative to traditional investing, BRICKX operates by buying a property, places it into a trust which is then split into 10,000 units, or “bricks”, which can be then purchased online by up to 5 per cent of the total bricks by any one person. BRICKX then takes care of the management of the property.
“We’re lowering the entry cost into property and allowing a lot of people to get their foot on the property ladder where they otherwise might not be able to,” Mr Millet said.
“We’ve got a pioneering way that is opening up Australia’s favourite asset class to those who have not been able to access this as an investment class before.”
However, Mr Millet said that fractional investment could also be used to provide an alternative revenue stream, saying that it can “bring many efficiencies to those who do love investing and property but want more diversification or more freedom or more flexibility”.
“I don’t think we’ve [BRICKX] replaced property investment in its entirety, but we are a way that brings many advantages to those who are already not in the market, or to those who want to diversify more with greater freedom and flexibility,” the CEO said.
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