While Europe feeds the its ambitions to be a leader in blockchain, the new technology is making small but significant forays into its real estate markets.
From Sweden to Spain in the United Kingdom, more private companies – as well as public bodies – are turning to nascent technology, which acts as a shared digital register for transactions in bitcoins or other cryptocurrencies. By linking data sources, documents and other types of information, blockchain can improve security, efficiency and transparency in transactions.
So far, residential markets are leading the real estate business. At the start of this year, a residential property was sold via blockchain in Manchester while at the end of last year two houses were sold in the United Kingdom with use of bitcoins .
After a two-year trial, the Swedish land register or Lantmäteriet is testing blockchain technology for sales of residential properties that could reduce the time taken between signing a contract and registering a sale months to few hours .
It is an initial and tentative step for the instrument, but it could not have been achieved without some basic elements. Essential information, such as property records, must be available digitally.
"Blockchain's success in the real estate industry is very dependent on the parties involved who collaborate and share data," says Stanleylav Kreuzer, senior analyst at JLL. "It's not the technology itself that makes the difference – that's what market participants have to do."
Blockchain becomes commercial
Market players increasingly include commercial real estate players. Construction, real estate financing, valuation, and real estate leasing and sale are "clear candidates" to use blockchain tools, says Isaac Pernas, CIO Southern Europe Cluster at JLL.
"Blockchain gives dynamism to commercial real estate procedures that have historically been very heavy and slow for the various participants," he says.
Evaluation is one of these. As a positive step for the assessment, both public and private parties must adopt blockchain technology and accept its tracking information capability, says Pernas.
"Evaluation is a complex operation that requires reliable data from all sides, and the validation of every report and data takes time," he says. "Blockchain technology means that checks can be performed automatically in a" chain of blocks ", without the possibility of manipulating or modifying data.The strength of an evaluation can therefore be checked smoothly and quickly."
Blockchain technology it is used by JLL for the first time in the valuation of Spanish commercial properties.
A new tool for a new era
With many of the national governments and European public bodies supporting the wider adoption of blockchain, its launch could accelerate for years to come.
The Government of the United Kingdom last year announced "Digital Street" – its plans to move its cadastre into blockchain by 2022. It is expected a greater movement by other European land registries – for example, Netherlands are considering blockchain technology – but the change will not happen overnight.
The initial hurdle for the blockchain, says Kreuzer, is the difference between the way public authorities in different jurisdictions are organized and the way they operate. Kreuzer points out that even a single federal and polycentric country like Germany hardly gets any kind of general consensus at the national level on how the blockchain can work easily.
"What might work in Berlin may not necessarily work in Munich or Frankfurt," he says. "Real estate transactions are rarely standardized, while real estate laws are complex and differ locally."
Ultimately, the implementation and validity of blockchain-based approaches such as property with tokens or smart contracts depend, in addition to technical aspects, on governments' willingness to change their processes and their legal structures.
More importantly for a broad adoption of this technology, even for real estate, is the indicative decision of the European Commission investing heavily in blockchain solutions in all sectors. It has the goal of making all public services use blockchain technology in the future.
"Decentralized authority and autonomy are still a completely new concept for most of the real estate market participants and governments," says Kreuzer. "Trust in technology must be built before extensive adoption can take place."
In April, 23 countries agreed on a European Blockchain partnership for the exchange of experience and know-how in the technical and regulatory fields. It also launched the Observatory and the Blockchain Forum of the EU in February with over 80 million euros invested in projects to support the use of blockchain in technology and society, as well as an additional 300 million euros. to be allocated by 2020.
It's all part of a growing digital society in Europe, where real estate can also learn from how other industries are adopting new technologies.
A digital tomorrow
Blockchain should, says Pernas, fit into the broader digitization of the European real estate sector. "Without greater efforts in digitizing processes, blockchain does not do much alone," he says.
One of the biggest challenges for blockchain is the need to reach a level of maturity and stability.
"This technology must be used where it contributes positively to customer service," he says. "The real estate industry needs to see this technology as a simple tool to implement and at a low cost – getting to that conclusion may take time."
The adoption of blockchain will therefore be gradual, says Pernas, which may not be bad thing.
"It makes sense to introduce it naturally," he says. "In this way, new business processes, based on the benefits of the blockchain, can be refined and improved."
While its potential to alter European buildings for now remains largely unused, interest from national registries and the use of blockchains for evaluations are steps in the right direction for technology.