Blockchain can be seen as a very secure database and, in the similar way that Excel replaced pen and paper records, Blockchain technology is able to help digitise records further, thus offering greater transparency and security.

For example, land ownership and a property’s history - what repairs or insurance claims has it had? e.g. subsidence, earthquake, floods - all of these potentially impact on the cost of insuring the property and can all be held on a ledger for each property.

The global commercial Real Estate market is huge, being valued at over $8.4 trillion in 2018, and has grown in size by over 15% since 2017.

The investment property market is typically dominated by institutions such as pension funds and wealthy individuals. Property tends to be illiquid, with many intermediaries involved in each purchase and sale, which adds layers of costs when buying and selling a property. 

Blockchain technology is going to have an impact on the property sector in a variety of ways, including:

       -Land registry – There is no reason why property records cannot be digitised and held on a Blockchain and, indeed, earlier this year HM Land Registry in the UK carried out a test project involving the digital trial of transferring property ownership confirming this. However, HM Land Registry concluded that while successfully speeding up the process of transferring title, it was simply a “proof of concept” and it was going to allow itself until 2030 to review the technology and decide the best way forward. However, other countries such as Dubai and Estonia have fully embraced this new technology for their land registry. 

      -Fractional ownership – Given the value of real estate, it is increasingly becoming more difficult for first-time buyers to get on the property ladder. In London, the average price of property last year was over £614,000, in New York $677,000 and Sydney AUS$ 1 millon. By dividing the ownership of a property into shares/tokens, it is possible for existing owners to sell a % of their property and so create more liquidity in the real estate sector. This is because more people are able to buy fractions of a property as opposed to the whole of the property. Furthermore, these property tokens could be traded on a Digital Exchange 24/7 and enable overseas buyers easier access to the real estate market, without the hassle of physical ownership and thus being responsible for maintenance, insurance, etc.

     -Income payments – Currently, rental income is paid to investors quarterly and are based on who is the registered owner on the day that the income is due. The actual payments are then processed via banks which, if they have to be paid overseas, can result in significant additional costs and time delays. However, if the property is “tokenised”, rental payments can be calculated and paid based on the number of hours or even minutes that an investor has owned it. The rental income can be paid immediately and cheaply, regardless of where the payment needs to be made. 

     -Removing intermediaries – Blockchain technology allows the creation of a trusted database with the ability to transfer the ownership of an asset. Therefore, once a property’s records have been digitised, it is possible to carry out the transfer of the beneficial ownership without the need for many of the current intermediaries – solicitors, estate agents, etc. The first property in the UK to be bought digitally was by a dentist in Wales in 2017. More recently RBS and Barclays have been carrying out trials to transact property sales using Blockchain technology. They found that the time it took to process a property deal reduced from three months to three weeks!

In a recent report on Real Estate, the Enterprise Ethereum Alliance (EEA) published a number of examples of how Blockchain technology can be used and the potential impact that this technology will have on the property sector.