By Adam Jennings
Being at the forefront of change is a place where every business person would love to be. There have been some huge changes within the Proptech industry over recent years that have allowed businesses to grow exponentially.
A few trends we could see throughout the next few years include a contactless approach to property management, real estate investment becoming a very common way to store capital (for the masses) and further development within the AI and augmented reality for property tour experiences. It won’t be long before every new build developer is using a virtual reality headset to demonstrate the size and feel of their brand new apartments.
Think about it, when done virtually, the uncontrollable instantly becomes controllable, with perfect weather and lighting every time. Ideal for a virtual tour of some off-plan properties in the sun.
A focus on co-ownership has also flared up within 2022. Allowing you to own a percentage of a million-pound property, visiting regularly and selling your share when ready. For people who want to put money into an asset that returns but is also extremely stable, this is something that cannot be ignored.
Another thing that is undoubtedly creeping into our industry is the progression of cryptocurrency. You will have probably heard of the terms ‘blockchain’ or ‘cryptocurrency’ – but you may not understand exactly what it is, or the power it holds.
Blockchain is a system of recording information in a way that is impossible to edit or hack. Any transaction that occurs on the blockchain network is distributed across the entire network for all to see. Normal databases have someone in charge, blockchain is different and there is no kingpin in charge, it is run by the people who use it. This enforces a level of security and trust for its users, making transactions simple and unshakeable, perfect for the real estate industry.
A cryptocurrency is a unit of digital currency that is monitored and organised on the blockchain network. Allowing users to buy and sell products in a way that is totally secure and visible to the public. Crypto fixes the problems traditional currencies face by putting the emphasis and responsibility in the currency holders’ hands. Examples include Bitcoin, Ethereum, Litecoin and many more.
Another change we are starting to see come into play within the property industry is blockchain technology. While our first thought springs to transactions relating to the purchase of property being complete in crypto, there are so many more transactions and facets to blockchain than just bitcoin.
Various startups have received multiple rounds of investment funding to bring ideas to the mainstream. While most are not there yet, those within the property industry (particularly in the US) are very much aware of the importance and significance this change could bring in order to shake up the current way of investing and transacting.
As we mentioned in the introduction, the rise in fractional ownership is exactly the type of opportunity that can be improved by blockchain technology. Rather than pooling significant amounts of money, each user looking to invest in shares for a property would be able to do so through a trading app, buying and selling shares as and when they desire.
The tokenization of property investments can only really be applied through blockchain technology. Reducing fees, speeding up transactions and processes and as well simplifying investing can only benefit the consumer and the overall take on how investing can be a positive way to store capital and receive benefits and an improved return on investment.
It is understandable that some of this may be a bit difficult to comprehend and understand at first, below is an example of exactly how easy blockchain technology can make real estate investing for those without hundreds of thousands of pounds.
RealT is an example of a platform that offers simplified investments within the real estate market. Their goal is to “democratise access to real estate investment opportunities, curated by a team of real estate professionals”. See this example of a recent listing.
The price per token currently stands at just $50.25 dollars and the expected income NOT including capital appreciation is around 11.16%. This is calculated using the net rent per token per year ($5.61) divided by the total investment which at the time of writing currently stands at over 1.2 million dollars. Rent per token is necessary to cover all the property maintenance costs, tenants that live within the premises will no doubt experience the occasional issue just like all of us, blocked pipes, burst water mains and so on. This gives peace of mind and a pot of funds to make sure the tenants are very well looked after.
The maximum token purchase per person sits at 5, allowing for a wide range of investors to get involved. What are your thoughts on this? Could we see more businesses push towards this model of property investing?
Some of the biggest challenges that real estate agents face when dealing with commercial property lie with finding the right tenants, dealing with freehold or leasehold, handling empty units and a range of additional costs. The blockchain could be the answer to saving time and money as well as increasing the security of transactions, leading to a much more efficient way of dealing with commercial units.
Almost real-time transactions via smart contracts is not the only benefit of the blockchain. The peer-to-peer network records provide a public history of transactions that have occurred, providing proof of every transaction that has ever taken place.
The only thing that blockchain struggles to get past is the common misconception that all of this only relates to bitcoin and cryptocurrency. We will discuss cryptocurrency and how it can impact the property industry later on in the article. However, in a report outlined by Deloitte, the opportunities for commercial real estate are clear:
With the tide turning on acceptance of crypto within the wider public, there is a real opportunity to allow users to purchase property using Bitcoin, Ethereum or any other cryptocurrency.
One of the first properties to be bought entirely using Bitcoin went for 65 coins in 2017 (valued at £350k). It is a shock to see that at the time of writing, 65 Bitcoin would be valued at around £1.7 million. Leaving one party with a substantial return on the initial investment.
Even more recently, on May the 5th 2022, an apartment in Braga was sold for 3 BTC. This makes it the first-ever real estate sale entirely of bitcoin within the country. Could we see large scale real estate businesses start to join in on this and accept bitcoin?
The US seems to have picked up the baton to spearhead cryptocurrency’s influence on the real estate industry. Miami in particular has seen a rise in transactions relating to property ownership. Regardless of all the talk, for many developers, the idea of using cryptocurrency strikes fear due to the typical lack of knowledge around the subject, but when done correctly, the upsides for them are huge.
Other major cities including New York and LA are catching on also, with deals being struck purely in cryptocurrency becoming more popular. In purely real estate terms, a buyer located anywhere in the world can put a deposit down on a property in the US in any cryptocurrency that moves from their digital wallet to the current American equivalent U.S. dollars with ease.
One of the larger businesses within the property industry that has started accepting bitcoin on a large scale is Expedia. After partnering with Coinbase (A large cryptocurrency exchange), Expedia allows users to be re-directed to Coinbase’s website to see the total cost of renting a property, with the exchange rate set by Coinbase.
Interestingly, The Bitcoin price for a booking will remain valid for only 10 minutes. If a user does not initiate a payment during this time, the Bitcoin exchange rate will be updated to match the most recent price updates.
Could we soon see the largest platform of Airbnb allowing users to take advantage of their digital assets to rent a property? CEO Brian Chesky has said that this is a “top feature users want Airbnb to launch in 2022”…
With the normalisation of a once scary topic, blockchain and cryptocurrency is starting to have a serious impact on the property and accommodation industries, with it now becoming something impossible to ignore. With cryptocurrency users around the world rising to over 221 million in June 2021, Crypto has undoubtedly started to intertwine more and more within the industry and the mainstream, with projected forecasts showing no signs of slowing down. We expect more growth for the rest of the year and beyond and we advise agents to be open to the idea of Cryptocurrency and not stubborn. The innovators and early adopters tend to be the ones who reap the most rewards later down the road. The agents who were ahead of the curve in technology were the ones who were able to thrive most during the pandemic and this is one of the latest instalments in the ever-changing digital industry. Be curious, be receptive and become informed about how this can benefit your business, it could very well be one of your smartest moves yet.
By Millie Taylor
By Ben Spowart
By Ben Spowart