What does it all mean and how is it relevant to NZ real estate?
Blockchain technology is emerging as a powerful trend for de-centralised finance, and more recently as a means to complete both real world and digital real estate transactions.
Just last month, the Real Estate Institute of New Zealand, in conjunction with the Real Estate Institute of Australia, published a report titled ‘Blockchain: Opportunities and disruptions for real estate.’ The report analyses both the opportunities and challenges for the real estate industry with the growing interest in blockchain based property transactions now evident across New Zealand and Australia.
The report outlines the security and cost benefits that come with blockchain technology, and the way the digital records of blockchain transactions allow transparency and ease of auditing.
So what exactly does ‘blockchain technology’ refer to?
Blockchain is the digital architecture that allows users to transfer value or ownership. Types of blockchain-powered technology include bitcoin, Etherum and NFTs.
Are there examples of blockchain-powered real estate markets within New Zealand?
Yes; Max Crowdfund, real estate crowdfunding platform, launched in New Zealand in 2021. Max Crowdfund is a Netherlands based company that allows New Zealanders to access real estate backed investment opportunities, with a low-level investment of only $100NZD. Simultaneously it grants project developers access to alternative financing.
Max Crowdfund’s Head of Development, Erwin van Kekem stated
“Max Crowdfund was designed as a global resource for investors and real estate professionals alike. Having achieved proof of concept in Europe, the technology is now ready to be rolled out to other jurisdictions and we are really excited about disrupting the New Zealand property market.
Real estate investing has entered a new, digital era. With more people working and making financial moves from home, online platforms such as Max Crowdfund are becoming infinitely more desirable.”
Since its launch last year, the Max Crowdfund NZ website is showing its first development in Invercargill as fully funded, proving the acceptance of blockchain powered investment and asset ownership in the New Zealand market.
What are the benefits?
The main benefit of crowdfunding platforms for real estate is the opportunities they present to invest in real estate, that may not exist otherwise. Due to the ability to purchase fractional ownership of real estate with smaller, entry-level investment amounts, more of the general population have access to purchase real estate in this way, without the need to qualify for a mortgage or part with tens of thousands of dollars.
How do NFTs fit into it?
NFTs or ‘non-fungible tokens’ are the latest craze to capture the real estate market within blockchain powered architecture. The inception of NFTs came about as a means to represent and manage ownership of real-world assets. This is similar to bitcoin representing currency, however NFT’s have the added element of a unique ‘token’ that is minted to authenticate ownership of a particular asset. Because the tokens are unique, there is no other data collection like it.
An NFT cannot be duplicated, and it can only have one owner at a time. There is also the added security of transparency, as blockchain ledgers are visible to all parties.
The types of assets NFTs can represent ownership of include both digital and non-digital property. This includes artwork, collectibles, avatars and real estate.
What are the benefits of using NFTs for real estate transactions?
· For one – it’s a lot less admin work. The ownership transaction in the NFT world is streamlined. It removes a lot of the administrative tasks of property ownership, due to the fact identity and ownership can be verified and transactions settled much more quickly. Property ownership can be transferred within minutes through an NFT transaction.
· Despite the fact that online transactions are widely reputed as being risky, NFTs can have a higher level of security than other digital transactions due to the fact they are encrypted tokens, and also because blockchains are unchangeable ledgers with no single point of weakness.
What does this all mean for the New Zealand market?
Generally speaking, blockchain technology and real estate is still in its infancy. The findings of the REINZ report ascertained that the general population is not yet ready for a fully blockchain-driven real estate market. The main factor behind this assessment is that regulatory bodies are still trying to fully understand blockchain technology to be able to develop some base regulations for property transactions.
There is still evidence that New Zealand is slowly making the shift towards alternate forms of property purchasing. Just last month, an Auckland vendor sold his family home with the option of paying for the property, either in full or in part, with bitcoin. The seeds of change have been well and truly sewen into the fabrics of the market, but execution is still a long way off.