Blockchain in Real Estate
Like a startled rabbit staring into headlights, this Gen Xer listened intently to the REIWA Trainer awaiting the lightbulb moment for clarity and understanding of what Blockchain is. Unremarkably, blockchain was simply described as a “chain of blocks”. Not that helpful to my understanding.
For the benefit of others, here’s how I was able to better grasp the blockchain concept. REIA CEO, Anna Neelagama assisted by pointing out that unless you’re a coder, trying to understand the blockchain from a technical point of view is probably quite pointless.
One way to gain understanding is to describe blockchain as a new layer of the internet building on Web1 and Web2. Web 1 was simply information being put out to be consumed in a one-way manner. Web 2 began to enable users to interact with content and “talk back” - remember the first online payment you made online and how revolutionary that was.
Web3 will have a new level of the internet called a blockchain. This facilitates legal and financial transactions to occur in a secure way representing a true economic exchange. This is due to the blocks (which are pieces of programming that cannot be altered) enabling a complex transaction environment with many parties simultaneously involved. The blockchain therefore removes the need for a third party - such as a bank – to be involved in the transaction. Bitcoin is a well known example of a blockchain.
As blockchains are unchangeable, malicious actors are unable to tamper with the transactions or contracts within it mitigating against fraudulent activity. The “smart” contracts (digitally created agreements) within the blockchain are immutable and record a complete history of transactions within the particular network which can be either private or public. PEXA, the digital settlement system now widely used for property transactions is an example of a private blockchain.
Real Estate transactions are, of course, more complex than a simple bitcoin trade, with multiple participants and processes involved in a typical transaction. However, the principles of value exchange remain the same and that’s where blockchain technology can begin to play more of a role.
Blockchain technology is able to verify, inform and enable transfer of property ownership. This is where things get complicated with the introduction of Smart Contracts, the Metaverse, Non Fungible Tokens (NFT’s), Decentralised Finance (DeFi) and Decentralised Autonomous Organisations (DAO’s). There is insufficient room to attempt to explain these terms. These are, in short, aspects of blockchain technology that can apply to real estate transactions in both the real and virtual world that are already with us.
No doubt, the aspects of blockchain technology will be more easily understood as certain applications of it are applied to real world situations. However, the idea that people are actually buying (spending real money) advertising space in a virtual metaverse is, for this Gen Xer at least, a bridge too far divorced from reality.
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Apr 4, 2024
Perth Property Takes Lead
It doesn’t seem that long ago when Perth’s property values made us the cheapest major capital in the nation. At the time, it failed to make any sense that Hobart and Adelaide’s median house prices were significantly higher than ours given our low unemployment, high wages, lifestyle and economic strength. Two years ago, Perth’s median home value for the March quarter was reported by Core Logic as $525,800. The current median house value for Perth as reported this week sits at $703,502. In March 2022, we were the most affordable place in Australia to buy real estate with all the evidence pointing to Perth being on the brink of a property boom. Back then, buyers dabbling in the Hobart property market parted with $820,000 during the quarter, in our nation’s capital they paid $982,000 and in Brisbane $760,000. In Darwin, the median house price reached $583,000 and Adelaide put on a tremendous 7.1 percent spurt from the previous quarter to reach a median of $649,000. Melbournian buyers paid a median of $1,121,500 for a detached house and Sydney topped the list with an extraordinary median of $1,590,900 for the quarter. Perth’s median house price growth for the twelve months to March 2022 was 4.1 percent. Compared to the same twelve-month gains had in Hobart (31.5 percent), Brisbane (26.7 percent) and Adelaide (24.8 percent), Perth’s property price gains back then were comparatively modest. Perth’s annual house price growth is now a nation-leading 19.8 percent and showing no signs of slowing. Brisbane sits in second place at 15.9 percent, Adelaide 13.3 percent and Sydney (somewhat remarkably given their high median price) has put on a further 9.6 percent. Remaining capitals are still growing but by less than 3.5 percent. Usefully, Core Logic’s statistically references ‘series peaks’ demonstrating current market sentiment within the context of a ‘since -COVID’ cycle. Brisbane, Adelaide and Perth are the last remaining cities to be at peak since that time with Sydney, Melbourne and Hobart all having peaked in early 2022. It would appear Perth has some way to go with Adelaide’s median home value at $734,173, and Brisbane’s – the capital most typically value-aligned with Perth – at $817,564 with both still growing. I predict Melbourne will continue to constrict from its current $778,892 median value, Hobart’s anaemic growth at 0.3 percent could turn negative at the year progresses and Sydney’s growth pattern will stall. I punt Adelaide is close to peak growth and whilst remaining positive will only gain 5 to 8 percent over the next twelve months and Brisbane should continue its double-digit performance for the remainder of 2024. With Perth gaining 1.9 percent in March and 5.6 percent for the quarter, we could see gains of around 22 percent this year. Meanwhile, local rents are up 13.7 percent for houses and 15.9 percent for units. Housing affordability has deteriorated and will get worse before more supply arrives.
Mar 20, 2024
Selling to Buy
Supply of homes to buy remain well below the long-term average. REIWA reports 3,971 listings available broken down into 2,230 houses, 1,129 units and 612 vacant lots. This time last year there were 7,262 listings. Meanwhile, sales volumes last week were 1,036 metro-wide up from an average of 615 weekly transactions in 2019. The lack of supply and listing choice is exacerbated by would-be sellers’ lack of confidence in coming to market, fearful of not being able to find a property that meets their needs once they’ve sold. And, given the high levels of demand, offering to buy ‘subject to sale’ of their own property is often trumped by buyers without such buying terms. Normally, sellers would rely on moving to a rental property for a short period in the event they’ve sold and yet to find an alternate home. However, the rental market is tighter than the sales market with median rents at $640 per week up from $360 per week in 2019. A mere 1,817 properties are for lease on reiwa.com and vacancy rates are at less than one percent. So, how do sellers overcome this dilemma? Firstly, be ready to come to market at short notice. Once you’ve chosen your preferred agent, present your home and arrange for professional photography. That way, your agent will be ready to go to market within a day or two should you successfully buy. Secondly, if you decide to sell and need to buy, structure the sale contract to give you sufficient time to buy an alternate home by negotiating a longer settlement period. Thirdly, consider a negotiating a ‘rent-back’ period with your buyer. This may not suit the buyer of course, but if an investor ends up buying your property, then this option comes into play. At settlement, sellers can remain in their home, pay rent to the buyer and have the luxury of only needing to move once upon finding their next home. Fourthly, introduce yourself to as may agents as possible when searching for your next home, give them your contact details and let them know what you’re looking for. This gives you more chance of securing a home ‘off-market’ whereby more flexible terms around settlement and the like are common. Finally, have confidence you’ll find a suitable home after you’ve sold. Sure, you’re not likely to be spoilt for choice and you may need to compete to buy, but there’s sufficient stock coming through the market to meet most family’s needs.