In 2010, 5,000 bitcoins could buy you a pizza, where 2017 brought about a modern-day phenomenon. That same number of bitcoins is now worth approximately $34 million. Its popularity has grown exponentially, and blockchain technology is here for the long-run despite any concerted attempts to apply intrusive regulation. This decentralised ledger offers the potential to streamline processes, minimise costs and improve efficiency in a number of markets. Among those markets, real estate is most likely to feel the ripple effect of this new age.
To fully comprehend why blockchain is being adopted into real estate, we must understand its benefits towards the sector. A report published by Deloitte on why blockchain should be considered for real estate leasing. Prerequisites for embracing this technology include the need for a common database, catering for the multiple entries that will modify it. Shared databases are integral to leasing real estate which collates a variety of information on properties. Several entities are involved, such as owners, tenants, operators, and service providers.
Blockchain provides the means to reinforce trust amongst these entities who don’t have pre-existing relationships. The opportunity for disintermediation is what excites certain players within the field. Trusted intermediaries can be removed via blockchain as transactions can be independently verified and reconciled automatically. However, many of these transactions, such as leasing and property management, are correlated and intertwined within the same common database. In this context, the value blockchain provides is independence between transactions, establishing transparency, as well as simplifying procedures related to these transactions.
Headlines have been made within locations including California, U.S. and Monte Carlo, Monaco, as they become hotspots for residential real estate investment using bitcoin. In January 2018, the most expensive bitcoin-to-bitcoin real estate deal traded in Miami. The Real Deal published that investor Michael Komaransky sold a 9,400-square-foot mansion in Miami for 455 bitcoins. At the time, this equated to roughly $6 million.
The utilisation of payment services to accept proceeds for rent or outright purchases on certain properties via cryptocurrencies has begun. This is facilitated by the U.S. service called BitPay, which has opened a much-needed method to cash out on the notoriously volatile digital asset. However, it hasn’t been all plain sailing for everybody involved in the implementation of blockchain into their real estate activities.
Brokerages in Ontario, Canada, are having a tough time expediting real estate transactions using cryptocurrencies. Ontario’s real estate regulatory body, the Real Estate Council of Ontario (RECO), is raising serious concerns about the matter. Daniel Roukema, senior adviser of external communications at RECO, said that: “RECO is currently reviewing the use of cryptocurrencies, such as bitcoin, in real estate transactions. “RECO does not regulate buyers and sellers, and if a transaction were to occur between two parties without the involvement of a brokerage, it would be outside of RECO’s purview to determine the legality or feasibility of that transaction.” The issue of blockchain that underlies the fundamentals of it becoming a success, is that cryptocurrency can’t be held with trust in the way regular banks operate during real estate transactions. Furthermore, the Real Estate Council of British Columbia has already banned real estate professionals from processing purchases in cryptocurrencies.
Whilst the advantages of blockchain technology are undeniable, one must question, will blockchain become generally accepted by all entities regarding real estate dealings? The revolutionary technology has been praised for its convenience of bypassing banking networks to offer low fees and expedite transactions; its fair share of scepticism has been called into question more recently. With the necessity of a middleman and third parties is being threatened, blockchain continuously questions the systems that govern our daily lives. Whereas the idea of this foreign technology entering such a sector was ludicrous a few years ago, today, it has a tremendous potential to reform the global real estate industry.