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Blockchain reaction

Thursday 11 May 2017

A new generation of proptech is seeking to transform the property industry by changing how we buy, sell and rent.

Blockchain technology is set to shake up the property sector, as expert investors plough billions of pounds into innovations that are changing the way real estate is traded, used and operated.

Well known for its use of digital currencies such as Bitcoin, blockchain is a giant, online public ledger which keeps records of digital transactions and allows users to transfer value, such as money and assets.

It works by grouping a number of digital transactions in encrypted blocks that have occurred within a 10 minute space, and sending them out to an entire network. Once a block of changes has been made and approved, it is added to the chain of previously verified blocks in a linear, chronological order - thus the blockchain.

Companies are looking to combine this technology with PropTech to transform the way property businesses are operating.

So, what does it all mean?

We have broken down the most common tech terms that you may have heard or read about recently.

PropTech - information, transactions and management technology that sets out to improve the property service experience. From property portals to mobile phone controlled smart home technology, PropTech is very much at the forefront of everyday life.

MortgageTech – mortgage technology specifically focuses on facilitating part, or all of the mortgage application process; with the exception of lending and loan services.

FinTech – a merging of finance and technology, FinTech uses technology and innovative business models to promote financial services, such as online payment systems, crowdfunding equity and debt platforms and online exchanges.

PropTech and FinTech have also crossed over to create ‘Real Estate FinTech’, finance investment technology that is specifically designed for the property sector. 

Where does blockchain technology come in?

The use of blockchain technology is expected to speed up the property transaction process, reduce the likelihood of fraud, provide more transparency and, ultimately, offer a safer investment.

Homebuyers have lost hundreds of thousands of pounds over the last year as a result of fraud, and as home identity scams becomes more prevalent, blockchain has the ability to eliminate fraud. It offers an incorruptible database where digital ownership certificates are cryptographically protected; this means that files would be secure and their ownership safe on a shared record.

But does blockchain technology really have the potential to change the property industry?

Professor Andrew Baum of the Saïd Business School at the University of Oxford seems to think so. Professor Baum’s research report PropTech 3.0: the future of real estate sees great potential for businesses to revolutionise the way houses are bought and sold. He said:

“There are clear problems with how UK houses are transacted. The process is not satisfactory and there’s a lot of money to be made from tech platforms that can make that process more efficient”.

With the expected digitisation of the Land Registry looming, HM Land Registry plan to test blockchain technology as part of their online effort, as a mechanism for cataloguing changes in land ownership. This means that in the not too distant future, the UK could see digital title deeds, smart contracts & digitally recorded property assets.

Sweden is already conducting tests with plans to digitise the country's land registry system with blockchain. Swedish company ChromaWay are working with the government, and together they have come up with a framework through a white paper and technical demonstration. It works by creating permanent, public ledgers of all transactions that could potentially replace complicated systems such as clearing and settlement with one simple database.

Blockchain has the ability to be the driving shift from the internet of information, where we can mealy view, exchange and communicate information, to the internet of value, where we can instantly exchange resources.

Whilst these advances may seem to be a long way off, there must come a tipping point when the cost of implementing a blockchain type system is going to outweigh the costs of current practices.

The technology industry is moving pretty fast and the property sector cannot afford to stay stagnant.