Real estate experts at Moore Global, a leading accountancy and advisory network, predict that $1.4 trillion of international property assets will be converted to digital tokens within five years.
In a report released today by Moore Intelligence, Moore Global highlights how a digital real estate revolution is spreading across the world as property specialists increasingly ‘tokenise’ assets to improve liquidity in the world’s most valuable asset class and make real estate investment easier, cheaper and more efficient.
Dan Natale, Global Leader of Moore Global’s Real Estate group and Managing Partner of Segal LLP, said: “Tokenisation is an emerging trend with potential to become a mega trend – and it is absolutely going to be a disrupter in global property markets. It has potential to lower the cost of capital, increase the pool of potential investors and increase liquidity.
“It could take time for a critical mass of institutions to invest with confidence in tokenised real estate. However, if even just 0.5% of the total $280 trillion global property market were tokenised in the next five years, it would become a $1.4 trillion market.”
“Tokenisation is driving innovation on many levels – it could lead to the launch of new financial products as well as the emergence of a new breed of property investors.
“There are challenges to overcome and uncertainties to resolve but we are just beginning to glimpse the multiple benefits it could deliver in the future.”
The total value of the world’s real estate is $280 trillion, dwarfing the value of other major asset classes. Properties from Shanghai office blocks to Texan malls and shares in Real Estate Investment Trusts (REITs) feature in investment portfolios worldwide as a means of diversifying risk, storing wealth, achieving capital appreciation and generating income.
However, the Moore Intelligence report highlights the long-held frustration for investors that property is a relatively illiquid asset class.
Moore’s Dan Natale said: “This presents challenges for investors looking to access new opportunities or divest assets at an optimum time and price. The emergence of new secondary markets for digital property assets holds the promise of increased liquidity.”
So far, experts believe that only a fraction of the global real estate market has been tokenised. Fragmented development of digital asset trading platforms, together with the numbers of new players entering the market, and the absence of centralised reporting of deals, complicate efforts to assess total current value.
However, based just on the value of deals made public in recent years, tokenisation already accounts for billions of dollars worth of digital property assets being traded annually and the value of individual deals is generally increasing.
Real estate experts at Moore Global report that institutional investors still largely remain on the side lines because they want to see how the market develops and are seeking greater clarity from a regulatory perspective.
However, the report highlights real estate tokenisation as the “inevitable” next chapter in blockchain’s disruption of capital markets – and property markets in particular – which fits with a forecast by the World Economic Forum that 10% of global GDP could be stored on blockchain by 2027.