A series of high-profile transactions have raised awareness about the value of the blockchain when it comes to property.
In 2019, Anna Villas in Paris made history with Europe’s first ever property deal handled on the blockchain. The €6.5million deal was a landmark for the European property sector and signals the direction of travel. When it comes to international property deals in particular, more and more people feel blockchain may be the future.
Blockchain is all the rage, but it’s massively misunderstood. While most people associate it with cryptocurrencies such as bitcoin, it is being used to transfer data in a host of different sectors, of which property is just one.
The number of transactions is rising fast. Earlier this year, an anonymous buyer brought a Miami apartment for $28 million in what the largest property transaction is paid purely in cryptocurrency. So, what’s the big attraction?
Speed and transparency
The blockchain works through a series of network computers each of which verify transactions. Details of any money sent is stored in a publicly available ledger which is extremely difficult to hack. This makes it a good safeguard against fraud and corruption.
This could be particularly useful in places where corruption or complicated regulations can lead to disputes about who really owns what piece of land. With the blockchain, data is open, immutable and accessible at any time without having to deal with the messy issues of banks.
It’s also much faster. By simplifying the transmission of data and cutting out the middlemen of banks and other organisations, it can greatly accelerate the time between the preliminary sales agreement and the deed of sale before the notary.
The development of smart contracts which do not require the intervention of third parties is also serving to improve the speed and simplicity of transaction. Digital contracts work in much the same way as paper contracts, but they allow all parties to ensure the information is completely secure and can’t be modified, as well as facilitating all processes much more quickly.
This is just the beginning. If smart contracts can be used to facilitate real-estate transfers, they can also be programmed according to different assets and stakeholders. Using the same approach, attorneys, appraisers and other parties involved in the transaction could all be paid via the blockchain. It would automate and speed up all the usual processes you see with property purchases allowing anyone to quickly and easily pull up any information they need relating to the property sale. It expedites the process of information retrieval and cuts out any ambiguity about key details.
The potential is vast. Just as the internet revolutionised commerce, the blockchain could do the same for real estate. Even so, there are some obstacles to development. It is new, unfamiliar and, to many people, unproven. In an environment in which trust is everything, the blockchain will have work to do in convincing some people of its value.
At the same time, while it can do much to shed light on the often opaque process of property transactions it is not a silver bullet which can solve everything. There is some way to go, but with multimillion-dollar transactions now regularly being paid via cryptocurrencies, it could become the norm sooner rather than later.