Regardless of whether you’re selling, buying, or tokenizing real estate, it is undeniable that the real estate/property market and blockchain are intricately interconnected. As purchasing real estate using bitcoin has become an option, the broader potential of bitcoin to revolutionize the industry is becoming apparent. The confluence of crypto and the real estate market is no longer fanciful speculation, but a burgeoning sector that has already started to reap dividends.
Real estate evolved: buying to tokenizing
Not many assets are more illiquid than real estate. The interbreeding between real estate and blockchain can be observed as far back as 2013 when Ragnar Lifthrasir initiated the International Blockchain Real Estate Association (IBREA). IBREA, as a fundamentally academic resource, did not garner much attention in its own right. However, it demonstrated that cross-sector interest was present and brewing. This mutual curiosity and interest took some time to evolve into the swapping of coins and keys – when this finally happened, Bitpay became one of the market pioneers.
During January of 2017, Bitpay revealed that in one of the real estate purchases in which the organization had been involved, the seller raked in an extra 1.3 million USD. The property was valued at approximately 4 million USD, but just as it was being completed, the value of bitcoin appreciated. This appreciation made the seller a cool 25% profit. The remainder of 2017 proved to be a memorable year for the organization, and they went on to process property deals worth 20 million USD. Also, the bull market of 2017 witnessed co-living initiative The Collective start accepting deposits in bitcoin. Also, during the month of October, a mansion in London (advertised for 17 million GBP) was made available for purchase exclusively through Bitcoin.
Tokenized real estate was founded upon a Bitcoin base
In the United Kingdom, real estate developer Go Homes started selling new properties using Bitcoin in December 2017, with a Colchester property worth 350,000 GBP being the first one (it was purchased by a bitcoin miner).
There were some additional complications in finalizing the trade in crypto as lawyer Adrian Toulson stated to the Telegraph: The Land Registry concurred in principle that property prices could be documented in bitcoin, but the buyer might as well opt for pounds, due to the inherent complications of calculating any capital gains taxes.
This is one of the reasons sellers have more or less insisted in payments via fiat currencies. What is understood here is that the buying and selling of real estate with crypto has been possible for some time, but the inherent complications have proved to be a barrier to active trading. The legal system, and other institutions are still playing catch up in technological terms. However, the number of real estate purchases using bitcoin, continue to grow; the groundwork has been laid for the next generation of bitcoin real estate purchases. Just this week, the developers behind Goldwynn, a brand-new development located in the Bahamas, stated they would accept crypto for trading purposes, and this included bitcoin cash. Pricing for their luxury beachfront condominiums range from approximately 500,000 USD to 4 million USD.
Tokenized real estate emerges
As the cryptocurrency industry at large is moving away from ICOs towards IEOs and STOs, the nature of interactions that blockchain projects share with legacy industries has also undergone change. This is specifically true with regards to real estate. Tokenization of real estate has the potential to reduce capital costs, with increases in liquidity – it is therefore natural for this to become the first industry where security tokens secure a foothold. In the near future, it wouldn’t be a shock if sports stars and entire franchises travelled down the same path. However, bricks and mortar are viewed as relatively safe assets to tokenize, they’re simple to value, and they can easily be divided into shares ready for tokenization and trading.
Deals are more than what meets the eye
Regardless of property being traded for bitcoin by various persons and organizations, some projects have not lived up to their initial promises and expectations. During September 2017, Aston Property Ventures made an announcement regarding a 300 million USD, 1,500-flat complex located in Dubai. The dubious project, with an equally suspect British duo behind it was hyped up as the first ever real-estate development to be priced in bitcoin.
Indications of customer interest were initially high, with an announcement being made that 1/3rd of the units available to bitcoin investors were sold out by as early as February 2018. Regardless of these preliminary indicators of success, the project, which was projected for completion by the summer of 2019, remains incomplete. Reports from Blockonomi in April stated that the project had been suspended.
Such public sketchiness has not stopped the flourishing connection between crypto and real estate. Harbor, a popular security tokens platform, has been behind tokenization of 100 million USD worth of real estate with a lot more in the pipeline. What started off as an experiment is currently a burgeoning industry, and crypto lies at its heart.