Property sales take a seriously long time to complete. There are a number of reasons for this, although often delays are avoidable, some are inevitable.
With so many moving parts and individuals involved in the process, it is often difficult for the buyer and seller to have a clear vision of each stage and the whole process becomes one big blur.
However, huge developments are beginning and are on the path to revolutionise the way property transactions take place, the key player in all this being blockchain.
I’m sure many of you reading this are thinking: “What actually is blockchain?”. Although there is no simple answer, essentially blockchain is a super-secure way of recording transactions, contracts and transferring data.
One characteristic that makes blockchain such a game-changer is the information it holds is not held in one place, and is instead stored on multiple different computer systems, known as nodes. Each node has a full copy of the ledger and every transaction proposed to be added to it. One thing to note, blockchain is a type of decentralised ledger, not vice versa.
New ‘blocks’ of transactions can be added to the ledger and old transactions cannot be overwritten. For those reasons, the design of the blockchain is said to be virtually incorruptible, making it perfect technology to record financial transactions.
Blockchain uses cryptographic hash functions to verify the authenticity of a piece of data, block, entering the chain. There are a number of companies leading the way in the development of blockchain technology and increased transparency during the buying process. Some notable start-ups in the residential and investment space include Coadjute, Propy, Directly Sourced and YourKeys.
Let’s look how blockchain could impact and revolutionise the property industry and ultimately aid estate agents:
1. Land Registries could use blockchain to transform the processes for property transaction and land registration
In April 2019, HM Land Registry conducted the first property transaction using blockchain technology. The sale of a recently refurbished, semi-detached house in Gillingham had previously taken 22 weeks, with all the parties involved, they tested how long it would take to run the sale and purchase through a blockchain prototype. It took 10 minutes. You can read more about the test here. The test was concluded as a success and it demonstrated the exciting possibilities the blockchain technology could enable, including:
-Speedier property transactions
-More trust in the transaction
-Higher levels of security
-Increased transparency for participants in the transaction
2. Tokenisation of properties could greatly increase liquidity in the market
The term asset tokenisation is often associated with blockchain. This concept is directly applicable to the real estate markets, and assets such as properties could be tokenised.
As previously mentioned, completing a property transaction is often cumbersome and inefficient, involving multiple middlemen. If properties were to be tokenised and sold to multiple buyers or investors, the buy-in price could be far less than it would be if the property were to be sold to a single buyer. This could open up attractive opportunities for both investors and first time buyers especially.
Similarly, if tokenisation were to become commonplace, property owners would have far more options when it came to selling their house.
Selling houses outright would continue to remain an option; however, tokenisation would also give each property owner the capability to sell a portion of their house as well as keeping a portion.
3. Less hands-on property transactions
It is typical for a solicitor to perform due diligence in a property transaction to ensure the seller of a property truly owns it. The solicitor also affirms the title of the property is clear.
Blockchain is likely to significantly reduce the need for the involvement of solicitors during property transactions. The “shared ledger” nature of the blockchain technology would ensure that the transaction was recorded in a tamper-proof, highly secure manner. Given the presence of the irrefutable digital file, no solicitor would need to check it.
These are not the only ways that blockchain will change the property industry in the future. However, these are shaping up to be three of the most significant changes that are fast approaching.
All three of these aspects have the potential to dramatically change the property industry in the coming years and ultimately make property purchasing far safer and more accessible for many people in the years to come.
*Miles Jacob is founder of Directly Sourced