Bitcoins have become a household name especially among the savvy millennials and a byword for one of the most recent tech phenomenons, blockchain. Although the era of blockchains has been applauded, discredited, adopted and rejected by governments, many people will agree that the technology is here to stay. After all history has taught us that value is difficult to discount.
If blockchains complete the fool-proof test of value cycle which has been ongoing over the past few years, then it will be grounded in the system, and with it will come a full range of disruptions! This year’s Wealth Report highlighted some of the interesting tweaks the technology will bring to the property markets.
First, the decentralised online ledger has and will simplify the trading of real estate assets like never before. Consider liquidity for instance. Real estate is not primarily a liquid asset hence it normally trades at a lower interest rate to bonds and stock. However, the use of blockchains could remove this bottleneck, transforming buyer behaviour and pricing of real estate assets.
Additionally, a number of governments have recently started experimenting with the use of blockchains in national land registries. Such initiatives will go a long way in improving the process of real estate transactions. As more of the legal processes moved onto a blockchain, the transaction time would be reduced and procedural conflicts could be eliminated. Already countries such as Georgia, United Kingdom and Sweden are exploring these options.
One of the most outstanding features on a blockchain is the security and verification of processes through contracts, otherwise known as smart contracts. These are coded self-executing contracts whose integrity and immutability is guaranteed since they are built on a public ledger system. Their advantage lies in the fact that they are cost-effective, secure and remove the need for third parties. What’s more, brokers, real estate agents and money lenders can profit from smart contracts.
Another remarkable feat of the blockchain property era will be the unitization of property. In essence, bock chains will allow property to be traded smaller tokens more easily by enabling buyers and sellers to trade in units or tokens of real estate over the internet. The result would be a massive increase in liquidity and major adjustments in real estate markets as property units could be traded easier than stocks are. Already there are platforms like Estatechain working on such solutions.
The technology has raised the potential to achieve full liquidity in property markets but others find the notion disagreeable. Opponents of the hype argue that like the internet, the effect of blockchain on the property industry won’t be much. Already awareness of blockchains is increasing and people will soon be able to evaluate its impact on the real estate industry.