House price affordability remains a perennial issue in Australia without an obvious solution. One innovative property development company, HeroX, appears to offer a partial solution at least as it seeks to disrupt the global real estate market with the tokenisation of the first property in Australia.
Tokenisation in Real Estate an Inevitability
As we shift from an industrial to a digital-led economy, tokenisation of real world assets appears to be all but inevitable, particularly for those paying attention.
Basically, I have for a long time been talking about [how] we can tokenise everything conceptually. What does this all mean? It basically means the breakthrough has been made to attach intellectual property, or physical assets, or digital assets, to a blockchain in a method that is transferable, instantaneously, to anybody, and storable, and proven in its store.Raoul Pal, Real Vision CEO
The tokenisation of real estate is just the latest example of a trend that includes art, fine wine, whisky, collectible cards, collectible cars or pretty much anything that is both valuable and scarce.
Property tokens are digital representations of properties and their financial interests, such as their capital growth and yield. They are supported using distributed ledger technology and smart contracts.
The company claims that tokenisation (or fractionalisation) lowers the barriers to entry for investment by enabling access to a wider pool of investors. The relative inaccessibility of real estate as an asset class is but one of the reasons many Aussie millennials prefer crypto over real estate. If you’re looking for proof, consider August’s Core Logic Home Value Index, which showed that Australia’s house price index grew by 16.1 percent over the past 12 months, the fastest growth in national housing values since February 2004.
Additional benefits of tokenisation include complete transparency and liquidity. This has the potential to negate the obvious downsides of investing in real estate – namely that you need a lot of capital (ie, highly concentrated), and further, that it is an illiquid asset with high transactional costs.
It will be worth watching to see how traditional lenders respond to tokenisation. For now, it looks unlikely that you will be able to borrow against your token. This is arguably one of the disadvantages of tokenised real estate – you aren’t likely to be able to access cheap and freely available credit.
Notwithstanding, the possibility to diversify one’s investments in a thriving asset class within a liquid market will undoubtedly be attractive to first-time and seasoned investors alike.
HeroX Launches First Tokenised Property in Australia
To get the ball rolling, there are four simple steps to becoming an investor within HeroX’s new luxury development:
- 1) Know Your Customer (KYC) and Anti-Money Laundering (AML) checks are performed for every potential investor to confirm the identity of investors and ensure they comply with the requirements of Australia’s regulations.
- 2) Invest – buy one of the 20 tokens available.
- 3) Get paid, every month, your share of the rental yield.
- 4) Trade – leveraging HeroX’s secondary market to trade your tokens.
To learn more about HeroX and how to get involved, visit its website for further details.
Crypto and Real Estate Intersect
Tokenisation is only one example of how the worlds of crypto and real estate are beginning to collide.
Some companies have started accepting bitcoin as payment for rent and increasingly, owners around the world are accepting bitcoin for the sale of their properties. Even within finance markets we’ve seen some major shifts as one company in the US is now allowing for bitcoin-backed refinance loans.
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