Could blockchain transform the UK property market?
According to estate agent Hamptons International anyone wanting to get on the first rung of the house ladder in London needs to save for 17 years to secure a 15% property deposit.
Buying property across much of the UK is a major exercise in frugality and perseverance – and possibly completely beyond some young people now.
On top of heart-stopping prices supplying heart-stopping debt is a side-menu of property support professionals wanting their cut too: conveyancers, agents, lenders and legal players.
Smart contract technology won’t make house prices cheaper per se. But some think the tech has potential to make property ownership more accessible and the sales chain cheaper and faster.
Are agents redundant?
Last year entrepreneur Anthony Pentland launched Agent Not Needed (ANN). Pentland was approached to build something close to UK online estate agent Purple Bricks. That disrupter has seen its share price soar by more than 220% since it listed at the end of 2015 helped by the promise of a fixed-price selling tariff of £849.
Handling both software and marketing, Pentland saw an industry ripe for upset. Most inside the industry were unaware of this, he says.
“In early 2017 I told a meeting of mortgage brokers that software was being built to replace them. They laughed at me. A few weeks later Habito [UK’s first digital mortgage broker] gets loads of press and raises £100m. At this point I knew this was where I would build my next company.”
Agent Not Needed describes itself as a peer-to-peer platform where you sell, buy or rent a property without agent interference.
On the sell side it’s free if you list yourself, £495 if you prefer the company to handle it. It’s free to list for landlords – no admin fees and free referencing. “Landlords pay only £99 if we find you a tenant,” Pentland told Open Ledger.
Social media shout-out
All Pentland’s marketing is done via social media deploying content marketing. How does he deal with skepticism from people dubious about flakey crypto associations? There’s no mention of cryptos or blockchain on the website he says. On the coin side is ANN’s marketplace, directly linked to platform success.
“It’s £0.001 per listing so for every 250 houses listed the price goes up by £0.25. ANN is the currency of our platform. But most people can never go to exchanges and buy – that’s way too difficult. So we take a card payment as normal and in the background 50% buys tokens from our internal pool and 50% buys the community tokens from the marketplace.”
Made for property?
Some argue blockchain is made for property sales. Every contract, recorded on a tamper-free decentralised ledger, would be automatically executed as each party completes their ‘bit’ of a chain. As far as local authority and planning permission searches go, that means fewer tiresome delays, plus less mortgage affordability ambiguities. In theory, at least.
Will Andrich, is CEO of Thaler.One, a real estate blockchain firm that buys European real estate assets and lets investors buy into their own blocks of property assets – an option previously closed off to most unless you were a big institutional buyer. He says the UK government is buying into blockchain.
“HM Land Registry recently launched Digital Street, a research and development project exploring how technology can revolutionise land registration and conveyancing in the future.”
He also points to Estonia, where a blockchain-based land register makes ownership records and property rights indisputable. Walmart and Carrefour recently transferred their supply chain processes to the blockchain he says, streamlining the very core of their businesses.
Dave Stow has been writing code for three decades. He’s now tasked to help Ordnance Survey, the UK’s national mapping agency, implement its digital services strategy. Stow has a special interest in land industry, the built environment and blockchain.
He says the key conveyancing parties in the property chain are:
- Solicitors tasked with the exchange of contracts
- HM Land Registry, to confirm transfer of ownership
- Companies such as clicktopurchase are disrupting this space with blockchain
“Digitally signing a contract written in English text,” he told OpenLedger, “has been legally enforceable for some years, but there is a legal question mark over the validity of contracts that are written in code – smart contracts.”
Though recognised in some parts of the US – Arizona, Nevada, Delaware – a blockchain-driven contract exchange in the UK is yet to surface. Many registers in the UK are anything but machine-readable.
And a property document detailing rights, restrictions and responsibilities is complex, often made up of brain-addling legalese demanding interpretation – a lot of nuance and interpretation involved.
“Moving to a machine-readable register, underpinning a software-driven land authority would require a significant strategic decision to make the move over a number of years – but it is not unimaginable,” says Stow.
There’s another issue needing interrogation – trust. In England and Wales the land authority is perceived as uncorrupt says Stow. There’s also a question of whether a blockchain model couldn’t simply be finessed by traditional software engineering “rather than the complexities of using blockchain”. In other words, a potentially overwrought blockchain model isn’t the only option.
Lose the geek talk, focus on value
There are heated arguments about what is or isn’t blockchain and what it might do for property. “They need to realise that no one cares about the tech; they care about the value it can bring. They need to shift the conversation.”
That was Jamie Burke, chief executive at Outlier Ventures & Convergence Venture Capital in a Property Week interview in 2017.
Burke was involved in “multiple token sales” when Open Ledger called. But his view is clear: open tech protocols are a “direct contrast and response to the closed proprietary systems of the past”, as his company put it in a submission to the UK Treasury recently.
Get space moving
Vik Tara is a property entrepreneur and the co-founder of Rentr, a software app to help buy-to-let landlords and property managers control their portfolios. Blockchain is not a silver bullet, he says, and brings its own problems.
Tara doesn’t think any proprietary software offering offers long-term longevity. He favours the open-source hyper ledger built on the top of ethereum. “You have big corporates behind it, like IBM. It will be the decentralised, open-sourced tech that wins it.”
Economy stimulant and access to the raw materials
He’s optimistic on long-term register reading. Smart contracting around the rental of any physical space looks interesting, he thinks.
“Whether that’s retail or office or residential. I’m most excited about the ability to shake up the way tenancy and occupation of property works. Particularly duration. We have a complex process of moving premises. For example, a shop… It takes time, with lots of places standing empty.”
That stimulates the start-up approach to the high street – the ability for entrepreneurs to take up premises for three months. “‘I’ve this idea. I want to run with it. I want to try it for 3-6 months to see if it will work’. It’s a strong driver for other things.”
Tara says a few local UK authorities are doing good work here. Gloucester council, for example. But he wants to see much more free access to the data that sits behind so many property transactions, commercial and residential.
“Things such as OS [Ordanance Survey] and the Land Registry. There’s lots of data that’s available that is commercially licensed, which doesn’t make sense.” Think of Royal Mail’s grip on post code and address data he adds. “This then gets sold and stifles innovation.”
He adds: “If you can grab all this data, link it all together and start to record it on a blockchain ledger, then…”
Could blockchain make house prices fall?
Professor Andrew Baum at Said Business School, University of Oxford caused controversy in a research document, Proptech 3.0, where he argued that an illiquid, hard-to-shift property market is actually attractive – for some.
“It is not obvious that everyone wants a more liquid real estate market,” he wrote. “If real estate traded more like a stock or a bond, prices might rise due to increased liquidity, but equally they might fall because of greater volatility and risks,” he says. Baum thinks the global banking system has survived over the past decade because “it has not been forced to mark property assets to market”.
He downplays blockchain’s ultimate impact on property. “If you accept the argument that blockchain will be as big as the internet all over again, ask yourself how much the internet changed liquidity in property markets. Perhaps a bit, but nothing seismic.”
Key global trends:
- The UK’s biggest property firm is Landsec, owner of the Piccadilly Circus billboards and many of Britain’s largest shopping centres. Landsec boss Robert Noel told CNBC in November that blockchain would “absolutely” have a role in future operations. If you look at the way what we provide, which is services to business, and those services are around contract, anything that speeds up archaic land law, and contract law, and leasing law, etcetera, will be welcomed”
- Blockchain property player Zillios claims more than one million properties on its books across 50 countries. Zillios claims its users benefit from proprietary software “landing them on top results pages for Google and thousands of search engines”. It says its geo-advertising search system will filter traffic for any region for a particular property and it only charges when someone views the property
- UK property agent Savills claims countries with a large population of young people – Ukraine and Vietnam, for example – are more attuned to smart contract property market change. “We have a large population of dynamic, aggressive, smart young people and a big start-up culture,” said Troy Griffiths deputy managing director, Savills Vietnam, recently. “I think we are in a wonderful position to take advantage of the new digital age”