Tokens will help Gen Z break into locked housing market

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  • Legal complexities in creating meaningful shares of immovable assets have historically made fractional ownership impractical.
  • Off-chain models for fractional ownership can come with concerns about the legitimacy of the acquisition, the number and identity of co-owners, and the conditions for selling one’s share.

Onchain fractional real estate ownership has the potential to address many of these issues by introducing transparency, accessibility, and creating more liquid markets for fractional real estate based on tokens. 

The beauty of onchain fractional real estate ownership is that it can level the playing field for investors of all sizes. It allows for quicker participation in a diversified portfolio of properties, which are otherwise inaccessible to individual investors. 

If we want Gen Zers to stop feeling locked out of the real estate markets, tokenizing real estate shares could be the golden ticket they’ve been waiting for. 

A final thought

In the words of Yogi Berra, “Predictions are tough, especially about the future.” But one thing I know for sure is that the future of real estate investing lies in embracing technology and leveling the playing field for all investors. 

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This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of CryptoMoon.

Opinion by Denis Petrovcic, co-founder and CEO of Blocksquare.

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The gap between generations regarding wealth is becoming increasingly apparent, as the older generations tend to control a large portion of real estate investments. Sadly, many young individuals find themselves confronted with the stark truth that inheritance might be their sole means of acquiring a home, assuming they are among the fortunate few who receive it.

In an era where living costs are escalating and property scarcity is prevalent, leading to intense debates about wealth distribution among generations, fractionalized real estate tokens provide a feasible avenue for Gen Z individuals to invest in real estate and potentially reap some of the rewards.

As a researcher, I’ve observed an intriguing trend in the U.S. real estate market. Individuals over the age of 60 collectively own more than half of the entire property market, while those born after 1980, representing Generation Z, only hold about 12%. This generational disparity implies that younger generations like Gen Z might have to exercise patience before receiving any substantial inheritance.

For many young individuals, the concept of owning property seems like an unattainable aspiration due to high mortgage rates that make the costs prohibitive. While baby boomers may recall their struggles to get onto the property market, this doesn’t diminish the fact that today’s generation is likely to spend their entire lives paying someone else’s mortgage as tenants instead.

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As an analyst, I can express this in a more personal and straightforward manner: Beyond merely increasing rents to cover my expenses, I also reap all the benefits when the value of the land or property increases. This current situation tends to perpetuate itself, keeping financially disadvantaged individuals in their predicament.

A foot on the ladder

Owning just a fraction of a property doesn’t tackle a housing shortage, but it does provide an entry point into real estate investment – something essential for anyone who can’t afford to buy a whole property outright. In other words, fractional ownership presents a beneficial option for those who might otherwise be excluded from the property market.

As a new crypto investor, if I don’t have enough funds for a substantial down payment on a property, an alternative strategy could be pooling my current savings to co-own a home that we rent out. This approach could potentially yield a portion of the rental income and profit from any property value growth. However, it’s important to note that this isn’t always as simple as it sounds.

Ownership of fractions, particularly for immovable assets like property, has historically been theoretically possible but practically complex due to legal intricacies involved in dividing a tangible item into meaningful shares. However, the blockchain technology, with its potential for tokenization and smart contracts, has long been touted as a solution to simplify fractional ownership of real estate. This concept has been discussed since the advent of Ethereum.

Straightforward on-chain property transactions have encountered significant legal and operational challenges that have so far hindered technological advancement in this area.

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Over time, the idea of turning real-world assets into tokenized form has grown more socially mainstream among traditional institutions. Meanwhile, economic circumstances have sparked greater curiosity about fractional ownership, resulting in a surge of companies offering off-chain services to streamline this process.

The onchain opportunity

While this underscores demand, current fractional ownership models come with many concerns and potential risks for owners: Is the acquisition a proper share of real estate or a security contract backed by the physical asset? Who are the co-owners, and how many? How do you know your shareholder vote is counted? What are the conditions for selling your share, and might these change?  

Ownership of real estate through blockchain-based, fractional shares could address numerous issues by promoting transparency, accessibility, and fostering more fluid marketplaces for fractional real estate using tokenized assets.

The rules of play and co-ownership status are available to all. At the same time, investors of all portfolio sizes can participate more quickly than today by trading real estate fractions as tokens. This opportunity spawns further opportunities. These include the diversification across a portfolio of properties that are all but closed off to younger individual investors. 

The opportunity to create liquid, accessible markets for fractional real estate investing is only achievable onchain, where assets can be issued, traded openly and decentralized. Otherwise, the liquidity and accessibility benefits become lost in a landscape of centralized companies where partial ownership shares cannot be easily traded or sold. 

For many members of Generation Z, it might seem like they’re permanently excluded from participating in the real estate market. Yet, tokenizing real estate shares could potentially serve as the tool that opens up property investment opportunities for future generations.

Denis Petrovcic serves as both co-founder and CEO of Blocksquare, a company specializing in real estate solutions using blockchain technology. With expertise in finance and technology, Denis is an active participant within FIBREE (The Foundation for International Blockchain and Real Estate Expertise), where he works to promote the integration of blockchain technology within the worldwide real estate sector.

This piece serves primarily as a source of general knowledge and should not be perceived nor used as legal or financial guidance. The perspectives, assumptions, and viewpoints conveyed within this text belong solely to the author and may not align with or accurately portray the standpoints of CryptoMoon.

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2024-11-14 23:15