|Blockchain technology can bring revolutionary changes to the real estate sector. — Photo tapchitaichinh.vn
Blockchain is the secure ledger system behind the Bitcoin cryptocurrency and it is the technology that has been credited with the power to reinvent the property sector.
Blockchain technology is notoriously complicated. In simplest terms, it is a shared record of transactions. Anyone can hold a copy of the ledger and anyone can read it. Changes ripple through all versions of the blockchain held worldwide. A locking method is employed to prevent any tampering by one party — making it secure.
Troy Griffiths, deputy managing director, Savills Vietnam, believes “blockchain has the capacity to revolutionise land transfers”.
If the technology were to be implemented for land-registry purposes, it would have several possible benefits. The automatic processing of contracts would mean that costs are reduced. There would be increased security as identity records are tamperproof and deal times are reduced, as a deal can be an entirely digital experience.
Blockchain puts real estate on a new footing. If it has the potential to increase liquidity and reduce costs, some significant barriers for investors are removed. If unitisation of direct property holdings can be achieved and/or if income streams derived from direct property holding can be split, it also decreases the ‘lumpiness’ of real-estate investment; the barriers between real-world holdings and synthetic derivatives start to break down, making investment liquid, transparent and instantly tradeable. However, it may be some time before this can be achieved, as further safeguards would need to be in place.
Griffiths noted in his recent regional review during Vietnam Quarterly Market Report Q4/2017, that “blockchain is coming, but there is yet to be any major breakthrough”.
Griffiths is also optimistic about blockchain application, particularly in Vietnam. “So far, Vietnam has been slow on the uptake of this new technology but that will change very quickly. We have a large population of dynamic, aggressive and smart young people and a big start-up culture. I think we are in a wonderful position to take advantage of the new digital age.”
Land registries around the world are interested in it because they suspect that blockchain could enable the ‘almost instant’ transfer of property ownership in a secure way.
One of the world’s oldest land registries, HM Land Registry in the United Kingdom, called it a “highly ambitious objective” that would require the most “far-reaching transformation in their 150-year history”. Earlier this year, HM Land Registry announced plans to create a virtual ‘digital street’ to test the new technology.