How will blockchain change the property sector?
In October last year, the first online property transaction by blockchain was completed. Since then, there has been a lot of chatter in the property sector about this cutting edge technology and how it works. But, rather than focusing on what blockchain is, the real revelations lie in what it can do. Let’s face it, you don’t need to know how the internet works to know that it changed the sector forever. The same is true of blockchain. So, what can blockchain achieve, and how can the property sector use it?
Blockchain could revolutionise the Land Registry It’s not unfair to say that way the Land Registry currently deals with information is archaic. But, keen to change this, the department has a vision of an “ambitious digital transformation towards becoming the world’s leading land registry for speed, simplicity and an open approach to data”. And, as part of this process, it is exploring using blockchain technology.
While blockchain was developed to manage Bitcoin transactions, it can be used to authenticate all kinds of digital information; including property titles. By streamlining the title portion of a property transaction, blockchain technology could save buyers time and money.
Interestingly, however, blockchain won’t just allow for the creation of a permanent and incorruptible record of land titles, it would also make these records publicly available. So it could make the Land Registry obsolete.
Blockchain could see an end to property fraud with blockchain; within seconds, a conveyancer could check an individual’s identity and confidently state that they are who they say they are. And, because each user has a unique digital identity, their financial information can be securely and efficiently shared. Funds simply won’t be released until a transaction has gone through. What’s more, according to the hype, blockchain is impossible to corrupt. With victims of property fraud often seeking to recover losses from conveyancers, and property title fraud costing the Land Registry approximately £10 million in indemnifying homeowners yearly, it becomes clear how blockchain technology could be revolutionary across the sector.
Blockchain could lead to smart contracts Blockchain supports the use of ‘smart contracts’, which could see money, property, or anything of value transferred in a transparent, conflict-free way. Entirely digital, smart contracts define the rules and penalties around an agreement (just as a traditional contract does), but also automatically enforce those obligations. For example, built-in triggers would release funds or exchange contracts upon receipt of payment.
Likewise, a smart contract could ensure that if a seller pulled out of a transaction, this would generate a compensation payment to the buyer (and vice-versa), making the collapse of deals less likely. So, in property transactions, smart contracts could increase certainty for buyers and sellers while speeding up the house-buying process.
Blockchain could speed up the conveyancing process. According to Clicktopurchase.com, it completed its first blockchain transaction in just one week. And, in an industry where more than one in three property sales fall through, and nearly 30% of those are attributed to slow sales progression and conveyancing issues, the speed of blockchain could be ground-breaking.
Like any uncharted technology, it will take time for the effects of blockchain to be fully understood by the sector. But it is definitely a trend to watch in 2018.
How do you think blockchain will change the property sector? Will it live up to the hype? Let us know.