Tokenized ownership remains a niche mainly because of its relative novelty and the remaining regulatory uncertainties. However, a new report found that even if only 0.5% of the total global real estate market were tokenized over the next five years, it would be well on its way to becoming a $ 1.4 trillion market
In recent years, the total value of the global real estate market has reached a staggering $ 280 trillion, dwarfing most other major asset classes and equaling the value of total global debt accumulated by 2020. Moore Global, a London-born International Advisory and Accountancy Network, has published a report bringing together expert opinions around the world on the potential of tokenization for this thriving, albeit traditionally illiquid, asset class.
For Dan Natale, Real Estate and Construction Manager at Moore Global and Managing Partner of Segal LLP in Toronto, the main benefit blockchain has for the sector is to increase liquidity by providing efficient, unintermediate infrastructure to underpin new secondary markets. For his part, David Walker, managing partner at Moore Cayman, who specializes in digital assets as an auditor, has claimed that the transparency and security of the technology also offers obvious advantages from the auditor’s point of view.
So far, the expansion of real estate tokenization has lagged behind expectations, among other things due to the reluctance of institutional investors and the lack of established secondary markets for trading in security tokens. That could gradually change, however, as the UK Financial Conduct Authority granted the Archax digital stock exchange an operating license last August. A year earlier, the Federal Financial Supervisory Authority (BaFin) had approved its first blockchain-based real estate bond issued on Ethereum.
Related: Tokenized real estate didn’t live up to the hype: real estate researchers
Andrew Baum, director of the Future of Real Estate Initiative at Oxford University’s Saïd Business School, believes real estate tokenization could finally pick up pace if there are signs of investor demand for partial ownership – something for which advocates of tokenization have been campaigning since 2017.
Last summer, a security token representing partial ownership of the luxurious St. Regis Aspen Resort in Colorado went live on Overstock’s regulated tZERO exchange and attracted record trading volumes. However, within less than a month, with the token performing relatively flatly amid the coronavirus slowdown, investors were offered substantial discounts on their resort stays to boost token sales. However, tZERO recently partnered to symbolize $ 18 million worth of shares in NYCE Group, a platform hailed as a potential Robinhood of Real Estate Investing.