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Barriers to property investing set to fall as Aussies embrace blockchain

Blockchain has long been touted as a game changer for the real estate industry. As REIA president Hayden Groves noted recently during the release of the report Blockchain: Opportunities and Disruptions for Real Estate, the technology “offers the potential to completely improve and grow trust in a real way”.

The report, which was a collaboration between the Real Estate Institute of New Zealand (REINZ) and the RMIT Blockchain Innovation Hub, outlined a number of key existing, shelf-ready opportunities to strengthen and revolutionise property transactions within real estate. Among them is fractionalisation.

Long heralded as a game changer for property, fractional investing in property is still in its nascent stages, but is expected to make a big impact on the market now that the concept of tokenisation has entered the global consciousness through heightened awareness of non-fungible tokens (NFTs).

As the report explained: “Tokenization is the conversion of the value of an illiquid asset (such as property) into a fixed number of liquid tokens, which themselves have a fractional value of the original asset.”

Platforms have been springing up internationally, as well as within Australia, to facilitate fractional investing in real estate for a number of years. But with the advent of tokenisation, the industry now has the opportunity to reduce “the many frictions of transacting between multiple parties”, as the report noted.

Key among the changes that tokenisation could usher in is a reduced barrier to entry for those looking to invest in property.

“[Tokenisation] allows property investment to become more inclusive,” the report claimed, because property could then be traded in more affordable shares.

And with that, it also makes a notoriously illiquid investment suddenly much more available as an asset to be cashed in when needed.

“Real estate tokens can be traded transparently on a secondary market facilitating liquidity of the asset,” the report noted.

But even as tokenisation is becoming increasingly more understood, and therefore more widely used, some roadblocks still stand in the way of the real estate industry’s rapid adjustment to this new tech.

Among them is the willingness of participants to engage with blockchain technology, as well as a need for demand to spur activity in the sector.

It’s part of the reason why Mr Groves has made it the mission of REIA staff to get an adoption strategy for blockchain more broadly off the ground.

As he noted: “The research is only as good as its adoption.”

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Property

Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.