Property investors expect to see property lease contracts based on blockchain technology in the next four years, according to a new study by BrickVest, a real estate investment platform.
More than half (56%) of real estate investors believe that the sector will adopt blockchain technology for transactions but only a third (31%) think it will be common business practice to do so given the prevalence of established gatekeepers such as trustees and notaries (the research carried out online with 101 property investors in November 2016).
Underlining blockchain's infancy in the sector, less than half (44%) of property investors claimed to be "familiar" with blockchain of which just 2% are "very familiar", said a statement.
According to investors, the most important benefit that blockchain will have to the real estate sector is its ability to speed up the process of buying or selling a property by enabling digitised contracts to be exchanged on a more automated basis.
This is followed by blockchain's potential to reduce transaction costs by disintermediating financial gatekeepers, reducing the risk of fraud by tracking each property's transaction history, and making the process more transparent. The hope is it will also encourage the growth of the real estate secondary market by enabling smaller investments and volumes to be traded.
Indeed, BrickVest's platform allows investors to invest in pre-vetted commercial real estate with the ease of an online trading platform giving investors a punt at real estate previously only accessible by large institutions such as pension funds, insurance companies and large family offices.
Blockchain-based real estate has made some significant steps in the US, with firms like real estate platform Ubitquity recording the first real property ownership transfer on Bitcoin's decentralised public ledger, using watermarked tokens known as Coloured Coins.
Ubitquity CEO Nathan Wosnack says blockchain reduces the possibility of fraud as all details are instantly verifiable, and not stored on easily exploitable centralised databases or paper ledgers prone to damage or loss. His long-term goal is to digitise titles to all assets (in this case real estate) and provide an immutable record of clear ownership in perpetuity.
BrickVest said it is currently prototyping blockchain as a repository system and has filed a provisional patent. This will enhance BrickVest's systems and controls above the market's antiquated legacy systems in an increasingly rigorous regulatory environment.
Emmanuel Lumineau, CEO at BrickVest, said: "Property investors are becoming more familiar with blockchain and many can see the transformational power it will have on the sector by simplifying, de-risking and lowering the cost of buying and selling assets.
"Blockchain is capable of turning the entire financial system on its head as transactions can now be directly exchanged in a transparent, cost-effective and secure way between two parties. Given the speed of technological change and increased pressure from investors for greater transparency and reduced costs, it's likely that blockchain will be adopted earlier than many investors think.
"Blockchain technology has already made the online investment market more fluid whilst acting as an interesting tool for the secondary market, enabling smaller investments and trade volumes. These smaller investments were not possible before due to the cost of the middle man."