Digital Assets: Emerging Trends After the Virus Pushed Real Estate Across the Digital Divide
The virus is forcing people to close real estate deals digitally.
Foreigners located in Japan, South Korea, China have suddenly discovered the virtues of closing real estate deals in the US remotely and online, writes Natalia Karayaneva in an article in Forbes. And the coronavirus deserves the blame (or credit).
However, the virus may be just a current catalyst for the metamorphosis of real estate from physical to digital. The change was already long overdue considering that money and stocks had already become digital. This was followed by comparatively low-value items – nowadays almost entirely transacted through e-commerce platforms like Amazon (NASDAQ: AMZN).
Only, it’s now the turn of high-value items such as real estate, cars, collectibles and venture investments to follow suit.
Real estate already priming for digitization
Karayaneva observes that increasingly ownership records of properties and cars are available in an electronic format. Further, transactions for the transfer of ownership are also now possible electronically such as through Docusign and the National Association of REALTORS. Entities such as Notarize.com are making e-notarization possible. These are very significant building blocks that lay the base for further electronification of real estate.
How will that happen?
Karayaneva discerns five unfolding trends.
Real estate: five digital trends on the way
The first change likely to take root is that real estate transactions will be conducted entirely online, just like buying or selling a stock. The ownership of the property, and payment, will instantly change hands. The development of more sophisticated ‘proptech’ will make this possible. Further, fintech innovations in payment processes, new mortgage tech such as Divvy or Better.com and very secure payment gateways for high-value transactions will come together to make this possible.
In the second trend, real estate corporations, venture capitalists, will invest in proptech by financing startups, accelerators, and venture funds. For example, proptech-focused VC firm Fifth Wall Ventures raised a $503 million fund last year to invest in real estate technology. Investors in the fund included CBRE and Cushman & Wakefield, real estate investment firms Equity Residential and related companies, and hospitality firms Marriott International and Starwood Capital.
In the third trend, the iBuyer real estate transaction model will become increasingly more popular. These are transactions that typically close within three days with higher fees to satisfy buyer or seller urgency.
Middlemen an endangered species
Fourthly, the real estate market could witness disintermediation due to the advent of advanced technology. Middlemen’s roles of agents or brokers may vanish or change unrecognizably. New types of services and a fall in commission rates may disrupt their business models.
Digital tokens the new currency for real estate
In the fifth trend, possibly by the end of the decade, reals assets will be transacted through the transfer of digital tokens representing the entire property or fractions of it. Once the system confirms identities and processes payment, the ownership will also transfer automatically. Moreover, commissions, though lower, will also be credited instantly to the respective wallets.
Acknowledgment: Real Estate Is Becoming A Digital Asset: 5 Trends For The Coming Decade And The Coronavirus Effect, by Natalia Karayaneva, Forbes.
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