Real estate investments have long been thought of as one of – if not the – safest forms of growing your wealth. Ray Brown understood this when he said the best time to buy a home is always five years ago.
Especially in Dubai, this holds true – the world’s epitome of real estate market stability and potential, with its solid legal framework to protect stakeholders, its remarkable past and future growth trajectory as a world-leading hub for business and tourism, and its underlying macroeconomic fundamentals.
It comes as no surprise that the world’s ‘crypto-rich’ favor the emirate as an investment destination. But how are we seeing crypto-property purchase inquiries and transactions surge exponentially in a time where the Bitcoin has tanked by nearly 57 per cent year-to-date and the crypto-market as a whole crashed by more than $2 trillion over the past eight months?
Surely, crypto aficionados wouldn’t want their investments to turn into realized losses, and instead would want to hold their coins until the market is back on its upward curve? This virtue of patience, however, is not found among all investors. As with ups and downs in all industries, there is always another side to it.
One could argue that many who have built wealth via crypto investments in previous years, and who are dismayed by the downward trend and perhaps anticipate a further drop, are now looking to convert all, or at least a portion, of this highly volatile asset class into the exact opposite, the safest, most stable investment one can make - Property in Dubai.
One could even go so far as to say that with investor sentiment in the crypto realm being at a pronounced low. This asset class is based solely on speculation, and with it being directly tied to discretionary income, which is rapidly decreasing following first the pandemic, then the Russia-Ukraine conflict, and now, inflation. The downward spiral is further exacerbated by people ditching crypto assets for other, more stable investments – and what is more stable than property ownership.
Why Dubai?
There are many outstanding real estate investment opportunities found across the globe, so why Dubai? Why does this emirate attract the highest number of millionaires globally with a projected 4,000 of them migrating to the UAE in 2022, far surpassing the likes of Australia, Singapore, Israel, Switzerland, the US, Canada, New Zealand, UK, India and others, according to the latest Henley Global Citizens Report?
Dubai appears to be the ideal location for crypto’s high- and ultra-high-net-worth individuals who are gradually gaining a footing in the real estate market. The remarkable rate of technological advancements today is matched only by investors’ ravenous appetite for stellar returns in both the physical and digital worlds.
Cryptocurrency is present in exchange and trades across industries, with real estate being of the most interest to investors. With it being evident that cryptocurrencies will play a significant part in future real estate transactions, Dubai established the Virtual Assets Regulatory Authority to sketch the playground for a virtual asset sector, consolidating its position as a prominent crypto hub. This new authority provides a secure and progressive operating framework for the virtual asset sector to be able to scale, while assuring market and investor protection.
This move has attracted renowned cryptocurrency exchanges to Dubai, effectively contributing in great strides to the investor sentiment. Despite the fact that the Emirates have not yet made cryptocurrency a legal tender, they do accept trading in various segments — real estate, at least via third-party exchanges and not through direct transactions, tops that list.
Why use crypto for real estate?
Crypto millionaires buy luxury real estate exclusively through cryptocurrency or split the cost between cash and cryptocurrency transfers. More than 40 million Americans own Bitcoins and are actively seeking ways to diversify their crypto portfolio into more stable assets. Such investors are on the lookout for risk-free, efficient, and optimal solutions with no downtime.
With crypto, there is no need to wait for a bank to open to initiate a wire transfer - blockchain-based transactions are safer and faster than conventional methods. For this to become a norm, we’ll need more time and acceptance.
Digital transactions are gaining popularity in international real estate markets due to their speed and simplicity. By utilising them, investors are not required to transfer funds between foreign banks or deal with currency conversions. With a sped-up payment process, acquiring real estate properties becomes possible in just a few weeks.
Cryptocurrencies, such as Bitcoin, are transparent – it is easy for organisations to verify the legitimacy of property investors who wish to purchase using cryptocurrency. When purchasing real estate via cryptocurrency, investors can set the price in fiat currency at Coinsfera and then convert the funds to Bitcoin. Property owners bear no risk of volatility if they convert it back to fiat currency after the transaction is completed.
Another prudent rationale for real estate investments in cryptocurrencies would be the desire for a long-term, reliable store of value. In contrast to traditional money, most cryptocurrencies have a finite supply controlled by a set of parameters for the elliptic curve. This prevents the governing body or entity from losing value due to inflation.
Moreover, those governing bodies cannot tax or access cryptocurrencies without their owner’s consent because of their cryptographic structure. Due to this characteristic, cryptocurrency is appealing to people concerned with hyperinflationary occurrences, more general inflation, or crisis scenarios. Deflated and censorship-resistant features of Bitcoin, in particular, have attracted a lot of attention, and are the reason many refer to it as digital gold.
Where do we go from here?
The majority of developers are likely still unfamiliar with the impact of crypto on the real estate investment landscape, with this still relatively new asset class challenging conventional thoughts. As such, the foundation for this new financial framework is being established, paving the way for industry stakeholders to learn how they can leverage it to buy and sell real estate.
This will have far-reaching consequences and raise more strategic questions - how far can the digital real estate revolution go? How can we stay ahead of the curve? What is in it for early-adopting developers, governing bodies, and other industry players who accept cryptocurrency deals as legitimate, legal, enforceable, efficient, and as here to stay?
Convenience, an extended marketplace, and increased security are major reasons that will continue to determine the popularity of using digital currencies for real estate transactions. As crypto payments become an alternative, they will continue to affect real estate investment processes in ways that are yet to be discovered.
Farhad Azizi
The writer is CEO of Azizi Developments.
