For many investors, an investment in individual properties was unattainable in the past, because prices have been rising for years, especially in Germany. But with so-called tokens, investors can already participate with the smallest amounts.
Real estate buyers are often faced with a number of hurdles. Whether broker, appraisal, notary or the entry in the land register – everything is associated with time and costs. Blockchain technology can ensure that these two problems are minimized. But that’s not the only benefit of investing in real estate using blockchain technology.
Invest in real estate with small sums of money
Real estate is an investment that is difficult to diversify for small investors. Until now, investors with low savings could only fall back on real estate funds or ETFs, which often only contained individual segments such as office buildings, shopping centers or shares of individual real estate companies. So-called tokens are intended to reduce the existing hurdles in the real estate sector and make real estate available to more investors.
The real estate tokens will not replace the existing real estate investment products in the foreseeable future, but they can represent a real alternative. Similar to Bitcoin, the various tokens can be automatically traded via a trading platform, which saves time and money. By purchasing small shares, even investors with lower savings can build up a well-diversified portfolio and do not have to choose a property or type of investment.
The Connex-Coin as a pioneer on the market
At the end of February 2020, the Federal Financial Supervisory Authority (BaFin) gave the green light for one of the first real estate tokens with the name Connex-Coin. The issuer is Raay Real Estate, a joint venture between the real estate companies Wertgrund and Hammer and the IT company Datarella.
Although the Connex-Coin cannot currently be traded on any exchange, it offers other advantages. Investors can purchase shares in a subordinated loan that runs until 2024 with an investment amount of ten euros or more. Interest on this loan will be three percent per year and, unlike many other subordinated bonds, can be canceled on a monthly basis.
These subordinated loans are stored and validated as so-called smart contracts in the Connex-Coin’s blockchain. “In contrast to classic cryptocurrencies, there are real estate values behind them, which have a significant impact on value development,” explains Raay boss Yukitaka Nezu.
The market is still developing
In principle, such tokens can be traded just as easily as bitcoins and other crypto currencies, for example. However, the real estate tokens still lack a suitable trading venue with sufficient liquidity. A candidate for such a trading venue could be the crowdfunding platform Exporo, which offers its own trading platform.
According to its own information, Exporo has implemented around 360 projects since 2014 and raised over 670 million euros in capital. According to Exporo, the annual interest rate is said to have been 5.78 percent, with around 28,500 investors taking part.
The corona crisis is not slowing down the real estate market
Contrary to some expectations, the corona crisis will probably not have a major negative impact on the real estate market in Germany. According to estimates by the Hamburg Gewos Institute for Urban, Regional and Housing Research, the Corona year 2020 could be a record year for the German real estate market. Accordingly, sales on the real estate market could grow to around 290 billion euros, which would correspond to growth of 0.5. The main reason for this is above all an increase in sales of 5.2 percent in the area of residential real estate with a total volume of 215.5 billion euros.
Because of the ongoing low interest rate policy of the central banks and the lack of living space in the big cities, real estate prices in Germany have continued to rise so far. According to a survey by the Berlin brokerage company Homeday, 34 percent of those questioned now expect prices for residential property to continue to rise, 27 percent of those questioned expect no change.
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