Tokenized property is still a niche, mainly due to its relative novelty and existing regulatory concerns and uncertainties. But, a new report has indicated that even if around 0.5% of the total global property market were to get tokenized by 2025, it would still be on track to turn into a $1.4 trillion market in the coming years.
The total valuation of the global real estate market has reached a huge $280 trillion in recent years. This valuation has eclipsed most of the other major asset classes and seems to be on par with the value of total global debt accrued by 2021.
Moore Global, a London-born advisory and accountancy network, has now published a new report. The report collated expert opinions globally on the possibility of tokenization for this thriving if traditionally immobile and illiquid asset class. Moore Global wanted to learn and determine the future of the tokenized real estate market.
Moore Global’s real estate and construction team leader who is also a managing partner of Segal LLP in Toronto, Dan Natale, said that blockchain’s primary benefit to the industry is a boost to liquidity by offering efficient and disintermediated infrastructure to support new secondary markets.
Another managing partner of Moore Cayman, who is currently working as an auditor specializing in digital assets, David Walker, has for his part said that the transparency and security of the technology also provide evident benefits from an auditor’s perspective.
Until today, the expansion of real estate tokenization has dropped below expectations, partially due to institutional investors’ hesitancy and the absence of established secondary spaces for security token trading. However, this may be gradually changing with the United Kingdom’s Financial Conduct Authority granting operational license to digital security exchange Archaz in August 2021.
One year before, Germany’s Federal Financial Supervisory Authority (BaFin) had approved its first blockchain-based real estate bond, that is issued on Ethereum.
The director of the Future of Real Estate Initiative at Oxford University’s Said Business School, Andrew Baum, believes that tokenization in real estate might eventually take off in case there is some evidence of investor demand for fractional ownership; something that the tokenization proponents have been vocal about since 2017.
A security token that was designed to represent fractional ownership in the luxury St. Regis Aspen Resort in Colorado went live successfully on Overstock’s regulated tZERO exchange last summer.
Notably, this token attracted massive trading volumes. But, the token experienced relatively flat performances in its first month of trading amid the COVID-19 slowdown. In less than a month, investors were offered major discounts on their stays at the resort to help in boosting the token sales.
Nevertheless, tZERO has recently struck a significant partnership to tokenize $18 million worth of shares in NYCE Group. NYCE is a platform that is hyped as a possible “Robinhood of real estate investing.”