Is blockchain technology set to disrupt the Australian property market?
Assisted by Maja Podinic.
Trying to save a deposit and secure a mortgage for the right property can be a truly daunting experience, especially if you forget to factor in the hidden costs, and the amount of time set to be spent finalising everything that comes along with the purchase of a property.
For the average home here in Australia, disbursements such as title registration, title insurance and any fees associated with the register of the property transfer can easily come close to $1000 - although as national land registries begin to give credibility to blockchain technology, the answer to these hidden costs may just be on the digital horizon.
The phrase 'blockchain' refers to an online ledger with the capability of recording the movement of any kind of asset, from one owner to the next. The potential relevance of blockchain technology within the context of the property market is that it is one hundred percent public, meaning that there are no charges to record the transactions. This also significantly minimises the need for middle-men, which leads into a range of further benefits.
Here in Australia, it typically takes over a month to settle a real estate transaction, however this time would likely decrease if the process became completely paperless with a move over to blockchain technology. It's interesting to note that while the United Kingdom, Russia, Brazil, UAE, Georgia and Honduras are starting to officially explore the use of blockchain technology for property transactions, the Swedish Land Registry has already done so, reporting that the benefits are being seen not only in the improved overall speed of the process, but in the security and verification of contracts - an increasingly relevant issue given ongoing international privacy breaches!
On a similar note, China's President Xi Jinping and India's Prime Minister Narendra Modi have both come out in support of the potential future uses of blockchain technology - with the Indian state of Andhra Pradesh becoming the first to adopt blockchain for governance, piloting two key blockchain-centric projects relating to the management of land records, and streamlining vehicle registrations.
According to Thomson Reuters, Australia's very own Securities Exchange provides a relevant example of the country's adoption of blockchain technology for "reducing costs and increasing efficiencies in a government regulated service". The ASX is currently leading the world to become the first fiat currency based securities exchange to adopt blockchain in its post-trade processing system, and whilst the ASX isn't a government agency itself, it is a regulated body - and its example has started prompting other exchanges (e.g. stock exchanges in Toronto, Abu Dhabi and Frankfurt) to consider blockchain technology.
It will be interesting to see how far-reaching blockchain technology does become in coming years. Within the context of the Australian property market, it is quite possible that we will see an increase in buyers who would traditionally be looking at investing in residential property moving towards commercial property investments.
Of course, whilst blockchain does seem to close certain gaps in the market, at this time it still is an emerging and rapidly changing technology and should therefore be approached with a certain level of caution.
UPDATE: It has been reported that the NSW Land Registry Services has paired up with blockchain technology provider ChromaWay in a proof-of-concept program to develop new services the privatised land titles office can sell.
If you have a query relating to any of the information in this article or you would like to speak with someone in Coleman Greig's Commercial Property team with regard to a legal matter, please don't hesitate to get in touch: