University of Western Australia
By Carrie Cox
Digital ownership of real estate through blockchain-based technology could help young Australians find a way into the otherwise impenetrable housing market, according to a finance expert from The University of Western Australia.
Dirk Baur, a Professor of Finance in UWA’s Business School and Director of the UWA Blockchain and Cryptocurrency Research Centre, said the ‘tokenisation’ of real-world housing assets was already showing considerable promise in pioneering markets like Detroit in the US.
The process enables a property to be divided into small digital units and sold to owners as tokens – for example, a $1 million property could be sold as 1000 tokens, each worth $1000 dollars.
It provides a much lower barrier to entry into the real estate market and potentially enables aspiring home-buyers to build a deposit more quickly through proportional rental income and price appreciation.
Professor Baur said while the concept might draw initial opposition from Australian banks and real estate agents wary of change, it should nevertheless be on the table for high-level discussion.
“I think governments should be very receptive to this idea,” Professor Baur said.
“It might not fix the housing market as such, but it would give hope to young people to get directly into the market through digital shares and that would be a much faster way for them to save for a deposit which, let’s face it, doesn’t grow anywhere near as fast as real estate prices.
“With asset tokenisation, your share value goes up as prices go up and I see no harm in that – it has a lot of potential.”
Other benefits of asset tokenisation included increased liquidity, as tokens can be traded on digital exchanges, and easier diversification of real estate stock portfolios to lower risk.
Professor Baur said security was also an advantage.
“The bitcoin system itself has never been hacked,” he said. “Hacking has happened to individual exchanges and platforms, but never to the original blockchain technology, which is amazingly secure.”
In Detroit, where private company RealT began tokenising the flat real estate market in 2019, an independent academic study published in 2023 found that “tokenisation fulfills its promises and leads to dispersed ownership of properties of modest value, which leads to substantial risk sharing across households”.
Many finance commentators believe that property, the world’s single largest store of wealth, is the next frontier for cryptocurrency and could triple the value of the $1 trillion crypto market on as little as 1% tokenisation of global real estate.
For now, Australia’s take-up of crypto investment remains moderate by world standards, dominated by financial investors wanting to diversify their holdings and realise a more efficient movement of assets.
According to Professor Baur, who consults regularly with the finance and banking industries to chart developments in the crypto sector, Australia’s crypto positioning currently sits between Switzerland and the US.
“We’re fairly centrist and semi-open in our position – somewhere between Switzerland, where there is a crypto valley, and the US where, despite approving exchange-traded funds (ETFs) earlier this year, there is a high anti-crypto sentiment,” he said.
“Regulatory uncertainty remains a challenge in Australia – a barrier to entry that has seen many local start-ups move to Switzerland.”