A digital real estate revolution is ‘spreading across the world’ as property specialists increasingly tokenise assets to improve liquidity and make real estate investment easier and more cheaper.
According to accountancy and advisory network Moore Global, tokenisation already accounts for billions of dollars worth of digital property assets being traded annually. While the value of individual deals is generally increasing.
Real estate tokenisation is fuelled by growing adoption of blockchain technology and the emergence of new
digital asset trading platforms that have created new ways to buy and sell property.
In its Democratising Property Investment Report, Moore Global says $1.4trillion of international property assets will be converted to digital tokens within five years. The total value of the world’s real estate is $280trillion.
“Tokenisation is an emerging trend with potential to become a mega trend – and it is absolutely going to be a disrupter in global property markets,” said Dan Natale, global leader of Moore Global’s real estate group. “It has potential to lower the cost of capital, increase the pool of potential investors and increase liquidity.
“It could take time for a critical mass of institutions to invest with confidence in tokenised real estate. However, if even just 0.5 per cent of the total $280trillion global property market were tokenised in the next five years, it would become a $1.4trillion market.”
According to the report, tokenisation could lead to the launch of new financial products as well as the emergence of a new breed of property investors. Tokenisation also has the potential to drive down transactional costs and improve efficiency via the use of ‘smart contracts’ which can replace copious paperwork and laborious administration. They can be programmed to automate actions such as dividend distributions or the release of financial data to investors.
However, the Moore Intelligence report also highlights the frustration for investors that property is a relatively illiquid asset class.
Natale adds: “This presents challenges for investors looking to access new opportunities or divest assets at an optimum time and price. The emergence of new secondary markets for digital property assets holds the promise of increased liquidity.”