Rarely without controversy, often misunderstood and one of the most intriguing products of modern tech, cryptocurrency could be about to move beyond transactions to create a new property sharemarket with much lower barriers to entry.
On top of that, blockchain, the system behind cryptocurrency, is already bringing its own kind of revolution to the industry.
Although bitcoin had a staggering fall in value during 2022, from about $65,000 to $24,600, it returned with vengeance to $107,000 per bitcoin this year.
There are trillions of dollars invested in the digital currency globally that are distributed through a computer network, and not reliant on any country or bank.
Forsyth Real Estate Agency principal James Snodgrass says it is absolutely possible to buy a property in Australia with bitcoin.
“We were the first property company in the world to offer properties for sale through bitcoin,” Snodgrass says.
“Around 2014 we did a press release and set up a joint venture with a company called CoinJar.
“There’s people who have phenomenal wealth and they’re looking at bitcoin for a transfer of value. If you try to transfer $10 million from China to Australia it is very hard but using bitcoin it’s very easy.
“You can transfer large amounts of money within hours for next to nothing, you try to do that with the banking system, it will take days, you’ll have to answer 1001 questions and cost a fortune.”
How many properties has Snodgrass sold this way? None, but it is possible and legal.
“We’ve been offered a lot of properties especially in places such as Vanuatu where there are beautiful properties but they don’t move quickly,” Snodgrass says.
“We were never interested in doing anything that voided tax laws or Australian laws, we were always going to transfer it through CoinJar into Australian dollars, stamp duty was still payable, agent costs, GST all those things.
“We were actually investigated by the tax department. They sent me an amazing letter at the end saying congratulations for all publicity and for running such a professional operation.”
RMIT University economics, finance and marketing senior lecturer Sarah Sinclair wrote a paper with the REIA looking at the possibilities of blockchain.
Sinclair says there is many implications for bitcoin and crypto more broadly—one is basically turning properties into shared investment.
“You can buy a very small portion of a property, and it could be globally, you might want to spend $50 to buy a fraction of a property in New York,” Sinclair tells The Urban Developer.
“They digitally wrap the property and set up a limited liability company and sell shares.
“So you’re essentially buying a token that represents ownership in the property and you can diversify your portfolio internationally and have very small holdings.
“It also lowers the barriers to entry—obviously buying property in Australia at the moment for many is out of reach but there’s the possibility through these kinds of mechanisms to engage with the real estate market.”
In some cases this fractionalised real estate creates online communities where each token equates to voting rights on how a property might be developed.
Sinclair says regulation, legal matters, capital gains taxes and the volatility of the market are big factors in making large-scale crypto transactions the norm.
Snodgrass says there is also an element of fear mongering such as the inference that bitcoin is only for criminals.
“Organised crime was doing it long before bitcoin and if it stopped tomorrow they’d find another way, it’s probably less [easy] because of tracking,” Snodgrass says.
“I’m the son of a banker. He was in the audit division so you can imagine how conservative he is and my mum worked in the legal department of the bank.
“So as soon as that [bitcoin] happened I knew something would have to change, and everything is going to be intelligent so why wouldn’t money?
“When I saw it on top of blockchain which validates everything—so you can’t just print money—I thought this has got a massive future.
“I think it’s only just beginning—this year the ability to transfer money around the world in real time will be introduced.”
Sinclair says central banks are already looking at their own digital currencies.
“There already exists a stable coin for the Australian dollar, which a lot of the banks have developed so you’ve got your digital currency that sits on a blockchain,” Sinclair says.
“Once you have the ability to go between different types of currencies easily it creates a whole range of markets and new trading possibilities.
“When it all comes together it will happen really quickly and just becomes normalised.
“People will have digital currency wallets and they might have Australian stable coins, central bank digital currencies at some point in the future and a whole range of different cryptocurrencies.”
Sinclair says the blockchain system would be useful in managing stages of contracting and the exchange of information.
“The attributes of a house could be captured in a token mechanism and all the information relating to that house would be captured in a blockchain context,” Sinclair says.
“All those bits of information that happen on a supply chain over the life of a property could be captured in a tokenistic way and that creates a real flow of information.”
You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.
