The Financial Markets Authority says there has been a growing interest in property crowdfunding with promoters proposing various business models, including one offering Kiwis a new way to enter the housing market by buying shares in a house share company.

The Ownery Ltd is offering people the chance to grow their savings through the housing market because many, particularly younger Kiwis, face an uphill battle trying to save for a deposit as the median price in Auckland edges towards $1 million and banks require minimum deposits.

The business model is similar to residential equity crowd-funding but doesn’t require The Ownery to have a crowd-funding licence. Rather, each company has to put out a product disclosure statement that requires Financial Markets Authority approval.

The regulator wouldn’t disclose specific details on any of the various models being proposed at this stage.

One of the sticking points for licensed property crowdfunding is that the platform can’t offer property from people associated with it under a so-called ‘non-association test’.

Given the recent interest in property crowdfunding, the FMA has provided a draft information sheet to industry participants for comment, which outlines what features participants should include into crowdfunding services of this kind that fall outside the eligibility criteria for a licensed crowdfunding service in New Zealand.

The regulator’s intention is to save time and effort for participants and itself before going public with a business model that doesn’t meet the rules.

The information sheet said management of the investment property is a key component of property crowdfunding and if the service includes an association between the service provider and the property manager for all offers, it won’t meet the non-association test.

Service providers should ensure any property investment offer allows shareholders to retain key voting rights over the investment and for shareholders to retain control over the property manager and the terms of the property management agreement, the FMA said.

Source: scoop