A future in which cryptocurrency is used to buy and sell commercial properties may be closer than you think, writes Peter Rose.
Fancy seeing your next property transaction settled using one of the plethora of cryptocurrencies that have insinuated themselves into the mainstream over the past decade? You may not need to wait too long.
Online monetary exchanges that operate independently from the traditional banking system, cryptocurrencies allow buyers and sellers to transact directly, with payments authenticated via digital record-keeping technology known as blockchain.
It’s been 12 years since bitcoin, far and away the best known of these encrypted digital assets, launched on the global scene. Its popularity among individuals and organisations engaged in illicit and illegal activities soon earned it something of a wild west reputation; prompting legitimate operators to give it a wide swerve.
But that’s been steadily changing in recent times. This past year, we’ve seen one country, El Salvador, break new ground by accepting bitcoin as legal tender. Closer to home, institutional investors, including pension funds, are taking crypto positions, incorporating bitcoin and other lesser-known alt-coins – alternative coins – in their investment strategies. While crypto markets can be extremely volatile, these funds have achieved decent capital gains for their members as a result; something not to be sneezed at in today’s ultra-low interest environment.
For sale: 700 bitcoins ONO
While it’s far from the norm, some ahead-of-the-curve residential property sellers are already accepting payment in digital assets rather than conventional currency.
In what was billed as a world first, a luxury home in northern NSW was listed for auction in March 2019, with interested parties requested to lodge their bids in either Bitcoin or Binance Coin. A smattering of other Australian investors have declared themselves open to crypto offers, including the owner of a luxurious renovated property in the Melbourne suburb of Reservoir, listed in August 2020 with a price guide of $880,000 to $950,000, or the equivalent in Bitcoin.
Elsewhere in the world, buying and selling residential property with cryptocurrency is fast becoming a thing. Scan US listings and you’ll find dwellings up for grabs around the country, with price tags in both dollars and digital currency. And, in my native New Zealand, I’ve encountered new home builders who are happily paying tradies with Bitcoin rather than bank cheque or transfer.
Clunky and expensive
Where real estate transactions are concerned, it’s not hard to see the attraction of a parallel financial system that allows buyers and sellers to complete the exchange of properties, titles, and funds quickly, safely and cheaply.
The current process for doing so is clunky, expensive and unnecessarily painful, with settlement inevitably involving sizeable fees for a host of interested parties, including lawyers, agents, and financial institutions.
Harness the power of technology to cut costs – and potentially cut some of those ticket clippers out of the action – and you’re unlikely to encounter too much resistance from buyers and sellers once they’re confident the new system is reliable and robust.
Which begs the question: if the popularity of crypto-currency deals continues to grow in the residential sector, is it reasonable to assume we’ll start to see them happening over in the commercial sphere too?
To which my answer is, why not? While the numbers involved are generally greater, often by orders of magnitude, the fundamentals of the transaction are the same, and the impetus to maximise returns by reducing transfer costs is just as pressing.
It’s possible a specialist cryptocurrency will emerge as the accepted global digital standard for the property sector; perhaps one with additional safeguards commensurate with the size of the sums that would potentially be changing hands. If it makes property transactions smoother and cheaper, even the most ardent traditionalists may be tempted to give it a try.
Does all this sound a little fanciful, or very far off, to you? While the property sector is notoriously conservative (the unkind might say hidebound!), it’s not immune to the disruptive forces of digital technology. In just a decade, cryptocurrency has morphed from clever concept to commercial reality. It behoves even the most sceptical of Luddites among us to track its evolution and, in time, evaluate the technology and the value proposition its widespread adoption as a medium of exchange represents. Those that aren’t willing to do so may risk being left behind as our industry continues to reinvent itself for the digital era.
Peter Rose is the chief revenue officer at Forbury.