By now, there probably isn’t an industry that crypto hasn’t disrupted, at least to some extent. Traditional is not bad, but the way cryptocurrency reshapes real estate is worth looking into.
Real estate is one industry that is reliable and has stood the test of time. And now it’s expecting an even bigger transformation, as the world is moving toward a cashless society.
If you’re in the market for a property, now’s the time to consider using cryptocurrency for your investment. According to the analysis by digital asset platform Forex Suggest, Spain has the largest number of crypto properties to purchase, a total of 289.
What piques the interest of most nowadays is a fancy property. And as we all want to be ahead of the curve, this article will focus on explaining how crypto is changing the way we invest in luxury properties.
Why luxury property buyers are turning to crypto
Well, it’s safe to say that cryptocurrencies are still a trend. The current Bitcoin daily transactions stand at 671,668, which shows that cryptocurrencies stop at nothing. They’re continuing to gain popularity and attracting more and more investors worldwide. Here are some of the ways cryptocurrency changes the landscape of real estate:
1. No more secrecy in real estate
Unlike traditional hidden transactions, crypto brings a level of transparency in real estate transactions. While this might sound a little scary to some, it’s actually a good thing because it reduces the risk of fraud and corruption in the industry.
So, let’s say you decide to buy a property in a more traditional way. You’ll negotiate with the seller under private conditions, meaning that every little detail of that transaction is available only to you two. However, crypto transactions are saved on a public ledger, meaning they’re visible to everyone.
This means that no matter what happens, the information of the transaction is there for all to see. And when it comes to luxury properties, this is especially beneficial, because large sums of money are involved.
A public record of transactions will also come in handy for those in the commercial real estate industry. By knowing what currently happens in real estate, they can easily keep up to date with trends and make better decisions.
2. Use of smart contracts and Ethereum
Smart contracts make everything easier. It’s not even surprising they play such a crucial role in the luxury real estate market. If we take a look back, we can see how complicated transactions used to be and how simple they actually could’ve been.
The need for a third party is totally overrated. Not only does it require tons of documentation but is a lot costlier as well. Now, blockchain has shown us there’s another way - a lot more efficient and a lot more secure.
Many platforms enable smart contracts but Ethereum (ETH) is the best one yet. And now, thanks to the increased adoption of crypto, you can easily buy ETH on MoonPay and start with smart contracts today.
You will never again have to worry about being left behind on important details. Smart contracts have got your back. The transaction will be saved on a blockchain, meaning from the moment of its execution, every piece of information is immutable.
With the use of smart contracts, everything is done automatically and you’ll be able to follow the whole progress no matter where you’re in the world. And since you’re dealing with luxury property transactions, you can be rest assured a higher level of security will be implemented.
3. Lower translation costs
Now, let’s discuss one of the most significant benefits of crypto in the luxury real estate world. We're so used to paying costs and high fees for the purchase that it has never come to our minds that there could be another way to complete the transaction.
You’d think that’s how the world works but cryptocurrencies have proven the opposite and provided a more useful alternative. Here are some of the ways in which crypto saves you money when investing in a luxury property:
No hidden fees. When there’s not enough transparency, like in traditional transactions, you might be charged fees you’re not even aware of. However, with every transaction being publicly visible, the chances of this happening are almost non-existent.
No third party. Obviously, third parties such as banks and brokers are charged for their services. This means that apart from all other costs, you have to pay additional ones. Luckily, cryptocurrencies thrive on decentralization and eliminate the need for intermediaries.
No conversion fees. Let’s say you live in the United States and are interested in purchasing a property in Europe. You’ll have to convert your US dollars to euros, which brings higher fees. Cryptocurrencies, on the other hand, allow you to make a transaction with the same currency without worrying about currency conversion fees.
Lower transfer fees. Traditional methods like wire transfers and international bank transfers are often associated with higher transaction fees. However, transfer fees with cryptocurrencies tend to be much lower and are often a normal standard rate.
Not to exaggerate but cryptocurrencies are giving us what we’ve always wanted - lower costs. Sure, many might say that a lot of risk is involved with adopting cryptocurrencies as payment methods but I say it’s worth taking a look into the benefits as well.
Traditional payment methods are nowhere near improvement, while cryptocurrency is constantly evolving, as we witness continuous digital transformation.
4. Liquidity
It doesn’t stop there. Crypto also provides liquidity for luxury property in a way traditional financing can’t. Imagine a scenario where you have your eye on a property but there are a few obstacles along the way.
For example, you don’t meet the conditions needed for securing a bank loan. 20 years ago, your options might’ve been limited but now you can use cryptocurrency to secure the funds you need. Of course, you have to be a crypto owner, as the only condition for the loan is for your crypto to be considered as collateral.
As things are going, these crypto-backed loans are becoming more and more popular, and with more than 420 million crypto users worldwide, this opens a world of possibilities in the crypto financing world.
Another thing. Let’s not forget that even though real estate is an asset, it cannot be traded in the same way stocks are - quickly and easily on an exchange. However, you now have the chance of tokenizing real estate and converting it into a liquid asset. That way, you won’t physically own the property but you’ll own it in the form of a digital asset that can be easily traded.
5. Long-term increase in value
Real estate will probably always be considered a high-return investment. So, what happens when we combine two assets that are already high in value? Easy, you get the best of both worlds - high-end property and a volatile yet valuable asset.
It’s historically proven that real estate is a stable investment. However, you might have to wait for many years before you see a significant increase in your home’s value. But with cryptocurrencies’ volatile nature, you might see these returns in a short period of time.
It’s important to remember that both assets have their risks and benefits. However, combining these two assets is a great way to diversify your portfolio and gain from the stability of real estate and the growth potential of cryptocurrency.
In 2021, a luxury penthouse in Miami was bought for $22.5 using cryptocurrency. This is just one example that shows you how big of a potential the combination of both cryptocurrency and luxury real estate has.
The challenges of adopting crypto in luxury property investments
While the benefits are what matters and are showing us that crypto is worth it, the challenges associated with adopting crypto in luxury property investments shouldn’t be overlooked. Let’s have a look.
High volatility. Cryptos are known for their volatility and this is in fact what makes people turn their heads away. However, this volatility is what makes cryptocurrencies high-rewarding.
Poor regulation. While blockchain is highly secure, the lack of regulation surrounding cryptocurrencies can be the reason behind possible fraud and cyber attacks.
Limited adoption. Even though cryptocurrencies are the new innovative payment method, they’re still now widely adopted. Their adoption in luxury real estate is most definitely in its infancy.
The future of crypto in luxury property investments
Luxury brands like Palazzo Versace Dubai, The Chedi Andermatt, and others are already accepting cryptocurrencies as payment methods. However, this is just a fraction and we’ve yet to see how things will turn out.
There’s no denying though, cryptocurrencies’ various use cases have benefits for every industry they infiltrate. The real estate industry is no exception and you can definitely be at an advantage by considering crypto when investing in luxury properties.
Author bio
Makedonka Micajkova is a freelance content writer and translator, always bringing creativity and originality to the table. Being multilingual with professional proficiency in English, German and Spanish, it’s needless to say that languages are her biggest passion in life. She is also a skilled communicator, as a result of having three years of experience as a sales representative.
