Property Tokenization – The Golden Key to London's Off-Market Real Estate
PropTech Institute
Promoting Property Technology for a Sustainable Built World in Asia
Citadao.io | 3 Nov 2023 | PropTech Insights # 87
Executive Summary
London's real estate market is seeing a shift towards off-market sales, largely accessible only to cash buyers due to slow loan approvals. However, a new technology, tokenization, is enabling more investors to participate in these deals. Tokenization converts property asset value into digital tokens, allowing investors to pool resources quickly. This trend, exemplified by CitaDAO's successful tokenization of a high-value London property, is predicted to grow significantly.
London: The Hotbed for Off-Market Sales
In the heart of London, the real estate market continues to buzz with activity, even in a post-COVID world. While the repercussions of the pandemic have led to significant market shifts, the city presents myriad off-market deals, making it an investors' paradise. An article by Ed Magnus for ThisIsMoney.co.uk underscored this trend, noting that an impressive 22.3% of homes changed hands off-market in the last quarter of 2022, a jump from 11% in 2019 and 8.4% in 2018. Historically linked to luxury properties, off-market sales are becoming mainstream. In 2022, 29% of London properties valued over £1 million were traded off-market, with homes under this threshold also joining the trend.
Fact Check: Nearly one in four London homes sold off-market in Q4 2022.
However, there's a catch: these enticing deals, potentially ranging from 50% to 70% off pre-pandemic prices, come with a stringent stipulation — they're accessible predominantly to all-cash buyers.
Traditional banking systems, especially in London, have been increasingly slow-paced in approving property loans, particularly for international buyers. A six-month waiting period isn't out of the ordinary. This elongated timeframe, coupled with the looming risk of deals falling apart, has rendered many of these lucrative properties out of reach for the average investor. The question then arises: how does one tap into this treasure trove? Enter tokenization.
Tokenization: The Game Changer
Tokenization, a groundbreaking PropTech innovation, bridges the gap between potential investors and London’s off-market properties. By converting the asset value of these properties into digital tokens, the process permits a broader spectrum of investors to quickly pool resources. This swift aggregation of funds ensures the all-cash requirement is met, unlocking doors to properties that were previously out of reach.
A shining example is CitaDAO's recent endeavor: the successful tokenization of a $4.2 million property at 5 West Halkin Street, London, manifesting the real power of PropTech. This achievement is not just a feather in CitaDAO's cap but a beacon for the industry, showcasing the possibilities that lie ahead.
Location: Nestled in the prestigious Belgravia Ward, 5 West Halkin Street occupies a prime 2,654 sq ft space over five levels, close to Buckingham Palace and major transport hubs. This strategic Westminster locale accentuates its high demand in London's property market.
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Tenant Profile: Leased to renowned British jeweler, Elizabeth Gage, until January 2, 2026, this property guarantees an annual rent of US$ 141,312. Given London's average rental rates, there's a potential 30% yield increase, hinting at a possible 4.1% p.a. yield.
Amenities and Features: 5 West Halkin Street, a Grade II listed gem, seamlessly merges historical elegance with modern essentials, catering to the tastes of elite tenants. It epitomizes luxury-meets-functionality in urban real estate.
CitaDAO, steered by seasoned real estate professionals, seamlessly blends traditional property expertise with blockchain innovation. Aspiring to be a counterpart to 'PropertyGuru' in the tokenized real estate realm, CitaDAO tackles liquidity constraints and access barriers. Stay updated on their latest tokenized properties by visiting here regularly.
Tokenization of Real-World-Assets (RWAs): The Future Trend
It's worth noting that this evolution isn't isolated. A recent projection by Boston Consulting Group suggests the world is quietly inching towards a tokenization surge, with the industry possibly reaching valuations between $16.1 trillion by 2030. Esteemed institutions like JPMorgan and BlackRock have subtly hinted at their alignment with this wave. Moreover, a report from Digital Asset Research underscores that real estate, along with equities, are among the primary assets being tokenized today. ■
The Author
Citadao.io is a Decentralized Finance (DeFi) platform for Real Estate to be tokenized on-chain, built on the Ethereum ecosystem. It is run as a Decentralized Autonomous Organization (DAO). CitaDAO successfully tokenized its third real estate in May 2023, validating its vision that Real Estate on Chain is more valuable than Real Estate In Real Life.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official position of Proptech Institute, including its directors, employees and affiliates.