The real estate market is experiencing more than just a transition from one stage of the typical real estate cycle to another. The market is dealing with transformation on multiple fronts. While all the changes may seem off-putting, and there are increased risks, there also are opportunities for those who are prepared to move forward in the transformed real estate market.
Real estate financial market has become more efficient to the investors and the competition is sharper as this industry continues to attract more capital that drives forces in real estate demand and appeal as an investment asset class.
To be able to cope with speed transactions and competitive exposure, real estate has been incorporating and developing new types of technology that rises the potential of the market. There are shared workspaces that have been taken off in Asia, lending a tech edge to the stodgy serviced-office sector and promising better returns for landlords. This year, investors are targeting higher returns, so they focus more on varied strategies than in the past to get money into the market.
This brings us to the latest emerging trend in the history of real estate; asset tokenization. By tokenizing assets, it immediately increases the attractiveness of investing in real estate as well as the percentage of population who are now able to gain access to this asset class they have dreamed of.
Though investing in real estate has been the goal of many investors, most have found that it takes a substantial amount of capital in order to do so and that has been one of the main deterring factors for them. With asset tokenization, the capital required is hugely reduced as the asset will be fractionalized into multiple shares for purchase.
In addition, liquidity will also be high compared to the traditional real estate market. This is important for real estate investors as one would be looking at selling the property which they had purchased at some point to realize their profits.
Among all the benefits of tokenizing assets, one of the main one would be that investors purchasing tokenized assets will not be burdened by any form of mortgage. In a traditional real estate purchase, the investor would most likely need to approach the bank for a mortgage. First of all, having a mortgage means that there will be interest that is payable which will erode some of the profits the investor will get from selling the property in the near future.
Another reason which we have seen many investors get caught up in during a financial crisis is that the banks may at some point decide to re-evaluate the valuation of the property. When the banks do this and proves that the valuation has indeed drop by a certain percentage which is not within the bank’s lending guidelines, the bank may then choose to do a margin call. What this means is that the property owner may be faced with having to shell out a sum of cash to pay the bank in order to not have the mortgage percentage rise above the bank’s lending criteria.
For some property owners, they are often unable to fork out the additional amount as they would have likely used up their equity in the purchase of the property. If so, the bank may choose to void the loan and confiscate the property. When this happens,
Therefore, we believe that by digitizing and fractionalizing assets, it reduces the investment risks for property investors among many other benefits.
