Could cryptocurrency change the future of the luxury real estate market?

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The past decade has seen growing interest from global investors in cryptocurrency, primarily popularized by Bitcoin and Ethereum. Although not dependent on technology for many years, the trend of remote work has certainly pushed real estate industry investments towards virtual tours, business calls, guided tours and the business could be even more challenged, as buyers look for opportunities to invest with cryptocurrency.

Demand and value for the digital coin has exploded, encouraging investors looking to diversify their portfolio to take the plunge. Looking at Bitcoin (BTC) trading history, roughly in 2018, 1.00 BTC could buy €16,721.00. In January 2022, 1.00 BTC can buy €36,999.00, a 45% growth in value in 5 years.

What is Cryptocurrency?

Introduced in 2009, pseudonymous developer Satoshi Nakamoto created a digital currency protected by cryptography, a secure code, which helps prevent counterfeiting or double spending.

One of the unique characteristics of these digital currencies would be that they would not normally be issued by any centralized authority, which would prevent any possibility of interference or manipulation of them by governments.

Using Cryptocurrency to Invest in the Real Estate Market

Faced with changing sectors such as banking, tourism, food and retail, experts are now pointing to its future influence in the real estate sector. Global trading partners like Microsoft, Amazon, Starbucks and Paypal have already started accepting payments in different digital currencies and experts advise that perhaps in 10 years real estate will assimilate in the same way.

As noted in the Sotheby’s International Realty report, the post-lockdown international real estate boom has been and is being facilitated by low interest rates and record levels of inflation. According to Sotheby’s, the interest in buying property with cryptocurrency has been met by the growing trend of working and living remotely.

According to a recent communication, Ryan Serhant, star of Million Dollar Listing New York, said that “Cryptocurrency has created the greatest wealth transfer of our lifetimes.” In the last three years, when the first cryptocurrency real estate transactions were made, these buyers used the profits from digital coins to purchase goods or transact in crypto, “wallet to wallet”. Serhant predicts “very soon a world in which 50% of all real estate transactions will be done with crypto.”

Could this be true? Well, maybe for major global financial centers like London, New York, Singapore, Tokyo. However, in 2021, one of the most expensive cryptocurrency real estate deals was bought in Miami, sold for $22.5 million. Miami may not be a financial hub, but it is indeed a top destination for remote work and living, which could reflect a location closer to nature like the Algarve, especially Quinta do Lago and Vale do Lobo.

What are the risks ?

As with any investment, the risks are somewhat unpredictable, but they depend on the type of business. When it comes to the emerging digital coin, four main risks are highlighted;

  1. Volatility – As seen at the end of 2021, huge price fluctuations were seen and these have now been part of the cryptocurrency landscape since its very beginnings.
  2. Storage – When buying cryptocurrency, it will usually be stored in your digital wallet, using a private key, which is inherently very long, along with a 12-word phrase. Everything that needs to be entered to access the wallet and make or receive transfers. This means that the process is at the mercy of human error, which is no small feat.
  3. Security – Using mobile or desktop applications to manage your digital wallet depends on a constant and reliable connection to the Internet, which is 100% secure against any hacker activity.
  4. Regulation – As with some technological innovations, especially digital these days, cryptocurrency is largely unregulated and decentralized in most countries and this might be its biggest challenge.

Buying property in the Algarve with cryptocurrency?

In a constantly changing world and industry, you always have to understand and be able to keep up with the latest trends and the interests of your customers. That’s what we aim to do here at ONE Select Properties. Given our local experience and our contact with our customers, we understand that this could be an innovation to adopt in a decade. Much depends on the perception of the client, the understanding of the agent and the lawyer of how it works, but above all on how the Portuguese legislation will accompany it.

“Get in touch with ONE Select Properties, if you wish to discuss your property investments in the Algarve”

+351 289 143 940 | +351 919 514 687

[email protected]

www.oneselectproperties.com

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