Tokenization is turning out to be the latest trend in the real estate industry. Although the market is still quite young, ScienceSoft’s research team predicts that by 2030, the global market for tokenized real estate will have hit $3 billion.
For a long time, investors all over the world have been ranking real estate as one of the best long-term investments. However, the high cost of real estate has deterred many investors from joining the market. In fact, a recent study in Australia by a popular crypto exchange in partnership with Protocol Theory revealed that more Aussies were shunning real estate and moving towards crypto investments.
According to the survey, many Gen Z and Millennials believed that crypto offers financial freedom and equality better than property does. It has now become common to see people following Solana price USDcharts rather than keeping up with the price of property. Crypto has taken over various industries, making it easy to invest in. For instance, the President of Binance France, David Princay, was quoted saying that,” Crypto’s now part of your daily commute. In Toulouse, France, you can now pay for all metro and bus tickets with Binance Pay on the public transport network Tisseo.”
In came tokenization of property!
However, crypto technology has crept into real estate, and the two industries have been working hand-in-hand. Right now, owning real estate is seemingly becoming easy since tokenization allows you to own a fraction of the property. According to Mary Zayats of ScienceSoft, real estate tokenization has ceased to be just another trend but is a shift in how people think about ownership, access and value. It is the point where finance meets technology.
The demand for tokenized real estate has been going up since many institutional and high net-worth (HNW) investors regard real estate as one of the most attractive tokenized investment options. In fact, a 2023 study by EY revealed that at least 80% of HNW (as of May 2023) had already invested or were planning to invest in tokenized assets, including real estate. Also, in 2024, a study by Deloitte revealed that by the first half of the year, 12% of real estate firms globally had implemented tokenised solutions, while 46% were still on the piloting stage.
Many real estate sellers believe that they will benefit from tokenization of property, since there is enhanced asset liquidity and better chances of attracting more investors from all sectors (even those with small portfolios). A property that would take ages to get one individual or institution to invest in, suddenly can be invested in since more investors with less capital have the potential.
Making purchases using crypto
As Yi He, co-founder of Binance, said, “Crypto isn’t just the future of finance, it’s already shaping the system, one day at a time.” So, investors working with tokenized property are using crypto to buy the tokens instead of wiring fiat money through banks. For instance, a $1 million property split into 1,000 tokens worth $1,000 each could be bought with ETH or USDT, depending on the platform.
For example, the tokenization of Tower 27 in San Jose was done on the Ethereum blockchain. So, it makes it quite easy to make the purchases of the tokens using ETH rather than using regular fiat currency. You see, transactions are conducted through blockchain-based smart contracts, which ensure instant settlement, transparency and automated compliance. Using crypto payments also helps reduce intermediaries like banks and brokers, ultimately reducing the cost.
Popular blockchains for tokenized assets include:
- Ethereum with eth
- Bitcoin with btc
- Ondo with ondo
- Avalanche with avax
- Gala Games with gala
Real-world examples of luxury properties that have been tokenized
Tokenization is not just the future of real estate; it is what is currently happening. There are a number of properties all across the globe that are being invested in through this process.
One of the most popular and largest single-asset real estate tokenization is the five-star hotel in Mayfair, London, that was valued around $600 million. Back in 2019, Liquefy Partners announced that they were planning to tokenize a luxury hotel in Mayfair district as the first project for a consortium of Gulf families on a larger real estate digital securities initiative. The goal was one: to increase the liquidity of the property and open it up to smaller investors by issuing digital securities backed by the asset.
The St. Regis Aspen Resort was among the first major luxury real estate tokenization projects. The resort tokenized 18.9% of ownership, offering 18 million Aspen coins on the Ethereum blockchain. Each Aspen Coin was valued at $1, and investors could purchase a minimum of 10,000 tokens ($10,000 USD). All investors (token holders) could receive rental income and share potential appreciation.
In 2020, BrickMark acquired property in Zurich for CHF 130 million ($140 million). A significant portion of the consideration was paid in BrickMark tokens that were issued on Ethereum. Elsewhere, in Bali, Bali Invest offers shares for a working luxury resort in tokenized form. The shares in the resort are each worth $1400, and investors are required to have a minimum investment of $7000. With the shares, investors have the opportunity to enjoy the annual profit distributions and VIP vacation perks,
Looking at tokenization of real estate property, you can tell that it is a very viable solution to the pricey real estate problem. Now, people with minimal investments can be able to get into the real estate market and become property owners just like the millionaires of the world. Interestingly, you and a HNW individual might be sharing shares in the same luxury resort, something that was almost impossible a couple of years ago.
