EstateGuru reports buoyant originations despite default concerns
EstateGuru has reported that its monthly loan origination volumes have remained “constant” at around €8m (£6.81m), as it pledges to reduce its default rate to below 10 per cent by next year.
In a mid-year update to investors, the European peer-to-peer property lending platform said that this year the company’s main aim has been to “grow and consolidate our origination strategy”.
However, going forward the lender intends to focus on reducing its default rate to 20 per cent this year, and to under 10 per cent in 2024.
“Following the focus on growth in 2022, we adopted a more conservative outlook in 2023, with the emphasis instead on core markets and profitable and sustainable growth,” said Mihkel Stamm, chief executive of Estateguru.
“This new focus is reflected in the monthly loan origination volumes in 2023 thus far, which have remained constant at around €8m.
“We cannot discount the impact of macroeconomic factors on investors and investing in general, but it’s also vital that we look in the mirror and identify the areas in which we as a company need to improve. In this regard, decreasing the default level is obviously a priority.”
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The company said that one of the principal aims this year has been to grow and consolidate the origination strategy and investment in the Baltics and Finland.
EstateGuru has 5,000 new registered investors and has repaid €43m in principal amount – resulting on average nine per cent return for investors.
Looking ahead, the company said it reached operational profitability several years ago. As the market conditions have changed, EstateGuru state it has adjusted in turn, “by reducing costs, focusing on existing markets, and increasing our capitalisation.”
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Stamm said EstateGuru is currently focused on strengthening its core markets.
“When the time is right, we will focus on growth again,” he said. “But with new and hard-won insights into how best to go about it.”
EstateGuru is one of the first organisations to secure a pan-European crowd-funding license in Europe. The licence allows the company to operate anywhere in Europe under unified rules.
“In order to comply with the new regulations, we have instituted several changes, including the implementation of new customer checks and complaint handling protocols” Stamm explained.
“We also reviewed our marketing messages to ensure they were in line with the new requirements. We have long championed the introduction of pan-European regulations, and even participated as a stakeholder in the legislative process.”
The platform has taken a number of steps to improve credit quality, including higher valuation standards, more emphasis on repayment ability and borrower background, and the integration of Moody’s ratings into its models.
In April, EstateGuru reported that it had passed its €700m lending milestone in the first quarter of this year, after completing 178 projects with a loan volume of €23m.
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