The increasing price of housing and construction, plus the inflationary impact of rising home loan lending rates, has placed the goal of home ownership beyond the reach of many New Zealanders. Many would-be first-home buyers struggle to raise an adequate deposit, as prices have outstripped their ability to save enough for a deposit. Many more no longer have sufficient income to support a mortgage at higher loan-to-value ratios (LVRs) and increasing interest rates that now exceed 6%.
According to QV New Zealand, in February 2022 the average price of a home in New Zealand was $1,053,483.00, which represents an increase of 22% over the previous 12 months. LVRs for owner occupiers are now 20%, with floating mortgage interest rates at the “big banks” in the range of 5.5% to 6.5% pa (interest.co.nz). CoreLogic’s Cordell Construction Cost Index rose 6.1% over the 2021 calendar year, slightly above the annual inflation rate that year of 5.9%, while wage inflation was only 2.6%.
Some home buyers get around this by way of joint ownership – buying a property with others, friends or family, in order to overcome the struggle of raising a deposit (perhaps through the Bank of Mum and Dad) and servicing the loan. These shared equity or co-ownership arrangements are fine if the parties have high trust in their relationship and are committed to it for the long-term. It can become problematic if a party wishes to withdraw or cash out of the relationship.
One method to overcome this liquidity problem is fractional or tokenised ownership, where investors can purchase digital tokens that are backed by a share of the legal title of the property. The purchaser of the property would purchase 7.5% to 10% of the token pool as their deposit, and the remaining 90% are offered to the market through a digital exchange. Over the life of the investment, the monthly ‘rent’ paid by the owner is used to buy back the tokens held by the investors adjusted for inflation and capital growth. All transactions are captured on a distributed ledger (blockchain) and ideally automatically updated in the land registry, thus guaranteeing title to equity token holders.
One European organisation that provides this service already is DigiShares, which is located in Denmark. DigiShares provides a platform for tokenisation, which involves the issuance, management and trading of securities in the form of tokens on the blockchain (tokenised securities). A United States company offering a tokenised trading platform for real estate assets is RealT.
In New Zealand, the land title registration is governed by the Land Transfer Act 2017, which would require some amendment if it was to enable the recognition of equity token owners on the registered title of a property.
In this way, mum and dad investors could access a secure investment instrument without any risk exposure to the cryptocurrency market and achieve much better returns than low-yield bank deposits. First home buyers would have access to a large pool of small investors and could avoid the need for utilising commercial banks for financing.
This disruptive use case for blockchain is already being investigated in New Zealand. Yesterday, the Real Estate Institute of New Zealand (REINZ) released Blockchain: Opportunities and Disruptors for Real Estate, a report that looks at blockchain’s potential to disrupt the real estate industry. It examines the opportunities and potential challenges as well as future technology enabled by blockchain, such as augmented reality to support virtual property tours and properties in the metaverse. REINZ recognises the need to raise awareness of the opportunities blockchain technology offers to improve current systems to ensure readiness in a quickly evolving market.
What are your thoughts on this matter?
What’s Happening at BlockchainNZ
BlockchainNZ, in collaboration with University of Auckland Business School, hosted a TechWeekTV panel discussion on the Digital Sustainability Index Report 2022 and the role and impact emerging tech has on our efforts towards our Net Zero carbon emission reduction goals. In case you missed it, you can view it here.
Led by Bryan Ventura (BlockchainNZ Chair) and Jeff Nijsse (BlockchainNZ council), we have launched the BlockchainNZ Podcast, where we interview one BlockchainNZ member each episode to talk about all things blockchain, crypto, NFTs, DeFi and more! Check out our latest episode, where Jeff Nijsse interviews Easy Crypto’s Head of New Zealand, Paul Quickenden. Listen to them discuss the recent market activity, Easy Crypto’s expansion into overseas markets, their process for listing new digital assets, the TerraLuna crash and stablecoin depegging event, as well as the price of cheese.
Executive Workshops: Understanding Blockchainn at the Board Table
BlockchainNZ is seeking a corporate sponsor to support the first of a series of educational workshops aimed at raising awareness and understanding of blockchain and distributed ledger technologies amongst executive leadership and governance directors in New Zealand.
Workshop participants will come away with;
- A deeper understanding of core blockchain technologies
- Practical hands-on skills in navigating cryptocurrency exchanges and digital wallets
- A better understanding of real-world use cases for distributed ledger technologies
- Improved ability to demonstrate due diligence in assessing blockchain risks and benefits in corporate decision-making.
If you would like to become a corporate sponsor for this pilot executive workshop and help support the adoption of blockchain, please reach out to our team for more information.
It’s been too long since we’ve been able to meet up, have a drink and talk crypto. Come and join us (at various locations around the country) for the monthly cryptocurrency and blockchain community meet-up held on the last Wednesday of every month. For more information and to see where your city meet-up is, visit our website. Hosted by CryptocurrencyNZ and supported by BlockchainNZ.
We’re also planning an Auckland industry meet-up for our members, where web3 developers, designers and creators, or those more interested in the wider industry, can come together, network and talk blockchain. Keep an eye out for our event listings and if you would like to be a sponsor or host a meet-up, please reach out to our team.
Crypto Legal Working Group
Members are welcome to join our working group to help our community understand the laws and regulations surrounding cryptocurrencies. If you believe you can contribute and want to be involved, please email us at email@example.com.
Call for Articles
Anything interesting being developed in your space? Do you have an opinion on the direction of blockchain and want to produce an insightful thought piece for our website? We’d love to hear from you. To submit an article, or for more information, please email us at firstname.lastname@example.org.Ngā mihi nui,
BlockchainNZ Executive Director