Georg Chmiel chats with Frankie Cheung about how blockchain is already changing real estate
EXPERT OBSERVER
Every now and then you meet someone who gives you a peek through time into the future of real estate. Frankie Cheung is one of those people.
Blockchain will fundamentally change the real estate industry faster than most people think. Property investment will soon work radically different for buyers, sellers, real estate developers, agents, and governments.
As Director of Deloitte’s APAC Blockchain Technology Lab, Cheung is possibly the region’s top expert on this subject and tells us what to expect. This interview is the latest in my continuing series of profiles for the PropertyObserver on the most interesting individuals in the real estate industry today.
Blockchain’s huge impact, Cheung told attendees at the recent Juwai Summit in Shanghai, comes from the fact that it lets you keep millions of strangers honest and consistent.
You can think of blockchain as something like any other online database. One key difference is that every participant keeps a live copy of all data records, which can include all steps of a property purchase and financing process, the title information, and much more. As everyone holds the truth, and this information is monitored on thousands of machines across the internet, no one can make fraudulent edits.
Wouldn’t it be nice to have a little more honesty and consistency in the real estate industry?
Cheung says his team has brought “together banks and government land registries on the blockchain to facilitate more efficient due diligence.”
He points to the HM Land Registry in the UK as a great example of how this works. The HM Land Registry is the UK’s official body for keeping track of who owns which bits of land around the country. It keeps track of more than 25 million titles — for property worth more than $7 trillion.
In Australia, we have state-based equivalents, such as the NSW Land Registry, the South Australian Land Titles Office, and so on.
Blockchain could revolutionize the way these organizations do their job. The HM Land Registry is working on a blockchain test project right now to make buying and selling property simpler, quicker and cheaper. The idea is to keep the land title records on blockchain. Then, when a property is bought or sold, the transaction will be verified and tracked on thousands of computers around the world, rather than just on one hackable database in the head office.
I remember reading about a man who went on a long vacation. When he came back, he found an imposter had sold his house and disappeared with the money. Even worse, the man couldn’t move back in because the people who thought they were the new owners were already living there. It could take many years and many lawyers to sort out a mess like this.
That kind of fraud should be impossible if property titles are placed on the blockchain.
At Deloitte, Cheung and his colleagues have already developed blockchain ecosystems for major banks to make their mortgage business safer. The banks want to make sure homeowners don’t get multiple big loans from different banks for the same property.
And Cheung says that a Swedish company called Chromeway is piloting what may be the first sale of property on blockchain to take place anywhere in the world.
According to Cheung, some blockchain innovators are trying to break up ownership of investment properties into shares. Rather than buying the entire home or office building, you could buy a portion of the asset worth, say, $1000. Better still, if you needed some cash, you could sell that share in an instant and buy another one again later if you wished.
Without blockchain, all this would be very complicated and involve lots of paperwork. With blockchain, it could be nearly as simple as buying a book online.
After speaking with Cheung, I’m convinced that blockchain will be here sooner than most people think. Within just a few years it may seem absolutely normal in Australia to invest in property, keep title records, and prevent mortgage fraud on the blockchain.
GEORG CHMIEL, the chairman of Juwai, a Chinese website for buyers of overseas property, was speaking to Deloitte's Frankie Cheung on blockchain in real estate.
Michael Hickinbotham in his regular column giving insight into the leading minds of Australian property experts.
He has spoken with LJ Hooker agent Bill Malouf about the ins and out of the Sydney market, REINSW president Leanne Pilkington about women in real estate, developer Larry Kestelman about developing your first property, Harcourts boss Mike Green on real estate investment secrets, Ironfish chief Joseph Chou on investing in today's market, liveability guru Cecile Weldon and Hickinbotham Group's Michael Hickinbotham.