With the arrival of Bitcoin in 2009 and subsequent blockchain currencies, talk of crypto real estate immediately followed, albeit with muffled murmurs.
Fast forward to today, and stories of seven-figure crypto real estate transactions have rocked the industry. As with any burgeoning technology – especially one that promises revolutionary changes – there are believers and skeptics.
However, what cannot be debated is whether or not someone with a vested interest in the real estate market should keep a close eye on what is happening in crypto real estate. As Scottish author George MacDonald once said, “The best preparation for the future is the well-cultivated present.”
As crypto real estate sales in Manhattan and Miami gain momentum, other global and luxury markets are testing the waters. In the Bahamas, what was once just cryptocurrency is now quietly changing the landscape of how property purchases are completed, says MAISON Bahamas founder and CEO Ryan Knowles. “As stores started popping up in places like Florida and New York, a lot of interest started to build here. Now there are a few different companies facilitating crypto transactions in our market and some developers are accepting crypto for home purchases.”
While there are still hurdles to overcome, Knowles believes real estate transactions will be easier than ever once digital currencies become a mainstream means of payment. “People used to just take cash, then that changed to credit cards and then to Apple Pay, and all these different payment trends made for an easier transaction. Now with crypto it could [potentially] get to the point where you can buy a house with the click of a button, like ordering coffee.”
Meanwhile, Knowles says that the immediate impact of crypto on the market can be seen in the whole new set of buyers that have been introduced to the Bahamian market thanks to the adjustment in financial frameworks. “These buyers who have amassed their wealth through cryptocurrency are not just entering the market, they are becoming big players and there has been incredible growth,” notes the luxury real estate specialist.
In Los Angeles, Hilton & Hyland’s Paul Salazar of Beverly Hills is watching a similar wave of new money hit the market. “Crypto has made a lot of people rich and this has added a whole extra layer of wealthy buyers looking to cash out their earnings and buy a mansion.”
Like the Bahamas, Los Angeles is in the preliminary stages of structuring crypto real estate, but no property has yet to be traded entirely with digital currency. Salazar believes this reluctance to accept crypto as payment is largely due to sellers’ fear of the currency’s volatility. While the benefits — speed, ease of use, and security — may lead to a growing number of sales being completed using digital currency in the future, reluctance will continue until crypto stabilizes.
As a top producer in Los Angeles’ ultra-luxury market, Salazar has seen firsthand how the recent decline in cryptocurrency values has impacted sales. “Over the past few months, we have seen a significant decline in cryptocurrency, which has led to many escrow cancellations. If you’re looking to buy a house and your crypto loses 20% in value the day before closing, you’re going to lose the house, and sellers in this market know that. At the end of the day, people still want cash.”
Entrepreneur, investor and author Mike Shapiro believes there is great value in taking real estate digitally, but finds the lack of stability of crypto investments too big a risk to overlook. “Blockchain technology could very well be the future of real estate for obvious reasons – it’s efficient. But these cryptocurrencies like bitcoin will have no value until something backs them,” says Shapiro. “Until then, it has no real estate value. There is no stability in it.”
Although crypto volatility has sent ripples across the investment landscape, the fluctuations are not expected to impact real estate, where housing shortages continue to drive the seller’s market. If anything, Shapiro believes long-term betting on real estate, particularly in high-demand markets, will continue to be a stable investment.
“Real estate behaves very much like stocks; it behaves like a stock. When you invest in good teams, good branding, or in the case of real estate, a good product, the money is in the bank. Neighborhoods like Beverly Hills or East Manhattan or Aspen are like Apple stocks; They won’t hurt as much in downtime.”
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