Owners of global luxury properties are increasingly showing their willingness to accept cryptocurrency as a mode of payment for their homes as prices of alternatives to fiat money have soared in recent years, according to agents.
About 14 out of every 100,000 property listings in the US accept digital currencies as payment, according to Marc von Grundherr, managing director at London-based property agency Benham and Reeves.
They include a three-bedroom ground floor flat with private outdoor entrance and outdoor patio in Scottsdale, Arizona, which is being sold for US$2.07 million, while a two-bedroom penthouse in the same state is listed at US$1.9 million.
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In the UK, two listings showed bitcoin are accepted as payments for a £17 million (US$23 million) West London mansion and a £270,000 one-bedroom flat on Clarence Road in the capital. Another will accept cryptocurrencies for a £1.27 million three-bedroom home in London.
“It’s certainly becoming more popular in the sense that there are some buyers utilising it as a pathway to purchasing a property,” said von Grundherr. “We’re now seeing a small number of mortgage lenders, banks and agents also starting to accept it as either payment or proof of financial stability.”
Cryptocurrencies are digital or virtual currency designed to be over the internet. They are decentralised networks based on blockchain technology, counting ease and speed among their advantages. Volatility, adoption and regulatory risks are their biggest bugbears.
Bitcoin, the best known among them and which has a finite supply, last traded at more than US$42,300 on Tuesday, according to Coinmarketcap, a trading platform. It surged 60 per cent in 2021 and more than 1,000 per cent over the past three years.
As a result, there’s a trend of sellers, particularly in the high end of the market, willing to accept cryptocurrency, according to Cathy Taub, senior global real estate adviser, associate broker at Sotheby’s International Realty East Side Manhattan Brokerage.
“Spurring this interest is a desire to incentivise buyers who may prefer to transact using cryptocurrency, or perhaps only have access to cryptocurrency,” she added. There is “a belief by sellers that cryptocurrency will continue to increase in popularity and value”.
For now, the number of properties that were transacted with cryptocurrency remains minimal, according to Johnathon De Young, agent at Russ Lyon Sotheby’s International Realty.
“Owners of crypto are pleased to see that they have the option to use their positions to purchase real estate and take advantage of some of their gains,” he added.
The industry will need to overcome several hurdles for cryptocurrencies to gain wider appeal or adoption, according to von Grundherr of Benham and Reeves, including the payment of additional costs such as stamp duty and commission to property agents.
“The other issue is the protracted nature of the property market and the volatility of cryptocurrencies,” he said. “The average property sale takes 10 months to complete in the UK or almost a year in London, while cryptocurrency values can spike or tank based on the latest tweet from Elon Musk. The two don’t match very well in that respect.”
One high profile property that can be acquired using cryptocurrencies is a £175 million (US$237 million) penthouse owned by billionaire Nick Candy. The 18,000 sq ft five-bedroom property is located in the prestigious One Hyde Park in Knightsbridge.
The property tycoon received an offer last year for the property using cryptocurrency as payment, he said in an email interview with the Post.
While cryptocurrency is a big opportunity in real estate transactions and a natural next step, Candy said the key issue is KYC (know your customer) compliance checks. It is unlikely to become more mainstream until there is a proper regulatory framework in place, he added.
“I was approached last year about accepting cryptocurrency for my penthouse and it is something I may consider as it’s clearly the direction of travel for the future – but the process would need to be completed quickly given the volatility of the currency, or you would need to be able to hedge the rate.”