The real estate market is constantly changing, with new trends coming and going all the time. Even right now, there are multiple trends that are dominating, and which might prove interesting to people who may be on the lookout for such opportunities.
Today, we will present four such trends to you, in hope that it might help those who navigate such waters.
Trend #1: Demand For Crypto Payments
The first trend that we would talk about is the growth in demand for digital currency payments in real estate. This trend has been slowly arriving to the real estate market for years now. Occasional cases of people buying real estate with cryptocurrency have been emerging for a long time, and lately, they have increased quite a bit.
The trend was noticed by some of the world’s largest payment and development companies, like PayPal, Square, and Visa, following the increased adoption of cryptocurrencies. PayPal, for example, reported gaining $16 million in net new active accounts in Q4 2020. It also saw $277 billion in total payment volume, which is an 11.8% revenue increase, all of which came after it enabled crypto purchases and sales on November 12th 2020. The adoption of crypto, on the other hand, comes for many different reasons — surging prices, greater media coverage, institutional interest, government adoption, central banks’ development of CBDCs, and more.
Crypto owners are now looking at real estate as a great way to convert large amounts of digital currency — primarily Bitcoin — into material assets. Of course, it is not as simple as just buying property for fiat — we have defined a prominent upward trend to conduct such transactions.
The trend is particularly popular with more luxurious purchases. Back in 2019, for example, a company called Magnum Real Estate Group sold a condominium in NYC for $15.3 million in Bitcoin to a buyer from Taiwan. Then, there was also a report by Buzzfeed News from 2018, which said that Realtor.com counted 37 single-family homes in the US that were accepting payments in Bitcoin, half of which were in Florida. One listing agent located in this state expected at least one-quarter of their sales to be made in BTC in five-years time.
Trend #2: Real Estate Sales Are Moving Online In Full
Recently, many in the real estate business have noticed a growing trend of buying real estate online. This is not that difficult to understand, given the global pandemic that has been holding a firm grasp on the entire world over the past 12 months. While traveling is still something that a lot of people are still trying to avoid — whether for health reasons or because a lot of the countries still remain closed — business cannot pause and wait for the pandemic to end.
This was particularly noticeable by firms that work as intermediaries for foreign clients from Asian countries, as reported by Forbes. Asian clients are continuing to purchase property around the world, and the pandemic is not stopping them, mostly thanks to the fact that their business is being conducted online, and that includes real estate purchases.
The world of digital assets is expanding, and real estate is, surprisingly, quite compatible with this way of doing business. After all, if money, stocks, goods, contracts, and a lot more can shift to their digital form, then why not real estate too?
Trend #3: Blockchain Technology Adoption Skyrockets
Technology has been reshaping the real estate industry for quite a while now, but blockchain has undoubtedly had the greatest impact thus far. This tech comes with a lot of benefits for the real estate industry, offering record-keeping, digital transactions, authenticity, tokenization, and more. All of this can be used for the creation of efficient solutions for commercial and residential real estate purposes.
One example is ATLANT, a company that created a platform based on blockchain, which is used to facilitate real estate and rental property transactions. It was also theorized that blockchain technology adoption could save the US mortgage loan industry as much as 20% in expenses per year. An estimation by Moody’s Investor Service claims that this could be up to $1.7 billion in annual savings.
For this reason, startups like ShelterZoom emerged. This particular firm aims to streamline real estate transactions by putting the processes on Ethereum’s blockchain. The company has partnered with more than 90 brokerages even before it went live in 2019.
Blockchain allows companies to conduct due diligence, enable crowd-sourced investments, and more — all through an immutable, decentralized distributed ledger.
Blockchain can improve trust and transparency, it can reduce siloed databases, allow for more efficient and cheaper transaction processes, and limit the use of intermediaries, which ultimately leaves buyers with more money for investing. It can make the property search process easier and faster, and it can make property management significantly simpler. Not to mention the improvements to financial evaluation processes.
Trend #4: Tokenization And Global Liquidity
With tokenization being such a big part of what blockchain has to bring to real estate, we felt like it deserves to be considered as a separate trend. It is a process of representing a fractionalized ownership stake in an underlying asset. The asset can be anything, not strictly real estate, although real estate is definitely one area where the process could see very large application.
So far, tokenization has had an extremely positive impact on the real estate sector. It has yet to reach full development, but it is growing, and someday, it will allow anyone to invest small portions of money into property, and later potentially trade their investment, not unlike what can be done with shares. The whole process would take nothing but your smartphone and a bit of money, which is nearly unimaginable to those who have gotten used to tons of paperwork and millions of dollars used for investing in real estate.
This is not the future, either — it is already happening. A Texas-based commercial real estate marketplace, Red Swan, tokenized billions worth of real estate assets. The process simply isn’t that well-known yet, but it is there, and it works. It improves liquidity — the speed at which assets can be converted into cash — it makes real estate investments more accessible to those who don’t have millions of dollars to dedicate to it, it can be mostly automatic, transparent, fast, cheap, and more.
How Will Financial Institutions Adapt?
So far, we have seen an incredibly positive influence that blockchain and crypto industries have already made on the real estate market, and they have only started its transformation. If we were to wait a few more years, the process is guaranteed to explode, and make tokenization of anything of value a common practice. + платежи в криптовалюте
Of course, there are still some questions that need answering, such as, how will financial institutions behave about mixing blockchain and crypto with real estate. Will we be able to pay the mortgage in BTC? It is possible — even likely — that financial institutions will simply learn to adapt over time.
Some companies allow users to pay in crypto, but only because they are partnered with firms that immediately convert crypto payments into fiat. In other words, it will likely take some time for the niche to rebuild so completely to ensure that deals will use smart contracts.
There is still a lack of reliable intermediaries that would work between buyers and sellers and handle crypto transactions for them. This is why development firms that rush to take up this position stand to benefit a lot as soon as they start offering such services. The demand for crypto is there, and so is the demand for real estate. And, as we noted at the start, there is even a demand to buy real estate with crypto. All that these people need is a means to do it.
Article by Oleg Balaev, founder of Goldfort OU and Bitexfin
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