I recently presented at the Australian Property Institute’s National Property Conference on the future of blockchain.
Respected technology experts predict that blockchain will have far-reaching consequences. In real estate it has the potential to provide digital orchestration between players, facilitating more efficient transfer and management of property through enhanced transparency and trust.
Imagine if buying shares meant actually going to the stock exchange, paying by bank cheque or cash and securely storing the physical share certificate.
That’s the experience of the hundreds of thousands of Australians who buy property each year. Blockchain has the potential to vastly improve their experience. It can remove the need for paper and boost transparency and convenience by holding all the relevant information in one place.
Blockchain has arrived
In some countries blockchain is already transforming property settlement. Dubai is the first government to put its entire land registry on a blockchain. Sweden’s land registry authority, Lantmäteriet, is testing a way to record property transactions on a blockchain. It could save Swedish taxpayers €100 million a year by eliminating paperwork, reducing fraud and speeding up transactions.
Locally, Property Exchange Australia (PEXA) is working to digitise the property settlement process and address many inefficiencies. July 2019 has been declared the “end of paper” for New South Wales conveyancing. An Australian fintech has partnered with a bank to trial a blockchain home loan processing platform that is integrated with PEXA.
Property settlement tomorrow
The first step to bring property settlement into the 21st century is digitising documents like sales contracts, mortgages and titles.
Whereas the internet transfers information, blockchain can transfer value in digital form. Through tokenisation, blockchain can uniquely and securely represent land and store it with relevant information on mortgages, caveats, occupancy, building performance and physical attributes. That would certainly make life easier for a prospective tenant or investor undertaking due diligence on a commercial property.
Blockchain could dispense with lengthy settlement periods, physical attendance and multiple bank cheques, which are prone to error. Cryptocurrencies and land tokens could enable instant exchange. Smart contracts could be incorporated to auto-calculate and apportion payments between relevant parties at settlement.
Urban planning, blockchain style
Urban planning is a very complicated process. It involves numerous interactions between councils and developers, starting with obtaining permission. As various milestones are achieved, experts like engineers must certify compliance before a financier will release a portion of funds. Only then can contractors and other third parties be paid. Retro-fitting existing buildings to get higher “green” ratings for example, involves similar complexities and knock-on effects.
Blockchain could co-ordinate the interaction between authorities, implementers and owners by holding chronologically ordered information in an accessible but secure database. Smart contracts could automate sending alerts to relevant parties if an element of the building permission or environmental regulations is breached.
Blockchain’s applications extend to property maintenance. For example, having one place to check when the fire alarms were last inspected, or reveal device malfunctions from data sent directly by smart devices to a blockchain register.
It’s possible to imagine a future where the buying and selling, development and maintenance of property could all be facilitated more efficiently via blockchain-based solutions.