Just recently, Precedence Research released a report claiming that the global metaverse in real estate market size had reached $2.99 billion in 2024. Surprisingly, the institution expects the sector to almost double in 2025 to hit $4.12 billion and grow by a CAGR of 36.55% in the next few years, hitting $67.4 million by 2034.
Another study by Custom Market Insights valued the global tokenization market size at $3.5 billion in 2024 and expected it to grow to $19.4 billion within the next few years. All these statistics are a testament to one thing: crypto is set to provide a new way of interacting in the real estate sector.
And do you know what? More robust tokens like Solana can actually be convenient alternatives for tokenizing high-value assets because of their low transaction costs. And if many investors adopt them, the Solana price could increase because of more demand. Now that digital currencies promise a great future for real estate, you may want to stick to discover just how.
Understanding tokenization in real estate
Simply put, tokenization involves converting ownership rights of a property into digital tokens on a blockchain. This allows fractional ownership of the property by dividing it into smaller parts, ‘tokens,’ which other investors can buy or sell on a secondary market.
This trend seems to be the new future of real estate because, according to ScienceSoft, more than eight in ten high-net-worth investors are already investing or intending to invest in them. As if that’s not enough, these investors are expected to allocate about 8.6% of their investments to these assets by 2026. And have we even talked about institutional investors, who could start allocating up to 5.6% within the same period?
Well, as much as this might be a young market in Australia, a good number of investors are already considering it. In fact, looking at it from a global perspective, close to 12% of real estate firms have already implemented tokenization. Reading on, you will learn how this contemporary technology could affect this industry, among many other things.
Liquidity in real estate
Liquidity basically points to how soon and seamlessly real estate owners dispose of property without significantly affecting their prices. When it is high, it means you can sell the property quickly because of increased demand. The vice versa is true when liquidity is low. Unfortunately, lack of liquidity can be problematic sometimes, especially during the following situations:
- Economic downturns during economic recessions that make selling property difficult
- Overleveraged property
- Impromptu personal circumstances like job relocation
- Market mismatches where property is unique and doesn’t match current buyer tastes
- High interest rates, and so on
In each of these examples, lack of liquidity can lead to significant financial losses, an experience no one desires. Unfortunately, even the size of this over 637.8 trillion-dollar market does not automatically make it liquid. Thankfully, digital currencies can help with this.
And as we have already mentioned, more robust tokens like Solana have emerged to ensure the whole process is cost-friendly, secure and transparent. In fact, Solana is already posing significant competition to Ethereum, which has been a popular option for developers in the past few years. Its mass adoption in Australia and across the globe might actually help once illiquid real estate assets become very liquid.
Several companies are already making this possible. For example, if you can remember, a few years ago, BRIKbc, an Australian tokenization platform, partnered with DigiShares, an end-to-end white-label platform, to make real estate projects in the country available to everyone via blockchain. This partnership would later allow anyone to own at least one BRIK Token in the country’s real estate property, making the market more liquid.
Reaching a wider audience
Referring to the BRIKbc- DigiShares partnership, a wider range of investors could participate in the market and build portfolios in various real estate projects in the country from anywhere. This is one of the magics of tokenization – it eliminates the restrictions of geographical barriers.
Plus, the barriers to entry into the market are eliminated. You can imagine the many challenges associated with real estate transactions, including property management fees and supply shortages, which affect the affordability of property. For instance, in Australia, you can spend typically about 6% to 8% of your monthly rent on managing rental properties. Now think of a scenario where you don’t have to spend all these.
Also, don’t forget the aspect of fractional ownership we mentioned at the beginning. Given that an expansive property can be broken down into smaller shares of an asset, many investors, including millennials who lack large sums of money to acquire such, can actually participate. This makes the market more inclusive, a popular emphasis of the modern business world.
Improving security
Fraud is not something anyone wants to dream about. Unfortunately, a good number of investors are usually affected. In the Australian market, more than 288,000 victims reported encountering scams in the 2023/24 financial year, according to the Australian Broadcasting Corporation. However, as much as this was a decline of about 0.6% from the previous year, the need to be more vigilant is very apparent.
The immutability of tokenized assets can really help as it ensures that no one can edit data once it is stored. Smart contracts also come in very handy by automating processes and reducing the errors associated with manual entries. This is without forgetting the assets’ decentralization, which helps minimize counterparty risks as intermediaries are not needed. This way, the network becomes transparent and traceable, reducing the chances of fraud.
What is our final word?
It’s actually true that crypto promises such a great future for the real estate sector. For instance, one of the main challenges investors and homeowners often face is the industry’s illiquidity. Have you ever experienced a circumstance like job relocation that needed you to sell your home? What was the experience like? Perhaps the process of disposing of the property was cumbersome because you had to wait for ages before you could find a willing and suitable buyer.
But, with crypto, such challenges will be dealt away with. Especially if the house is quite expensive and finding a relevant buyer proves unattainable, tokenization could help sell it in ‘manageable fractions.’ We haven’t even mentioned crypto’s decentralization, which helps ensure transactions are secure and transparent.
As with any other technology, tokenization in real estate is not without challenges. For instance, we might need clearer regulations and standards to improve user safety. Plus, there are not many opportunities for interoperable secondary markets to support this property token trading. However, since things are still at a young stage, maybe investors will find ways to overcome these challenges in the coming days.
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