People in the UK have started selling houses for bitcoins rather than cash and seeing promising results, but some worry the volatility of the currency will be a barrier to growth.
A new-build four-bedroom house in Colchester, Essex is to be sold for either £375,000, or 82.55 bitcoins – which at the time of going to market was equivalent to £350,000. This equates to a £25,000 incentive for buyers choosing to make the purchase using the cryptocurrency.
Meanwhile, Grimsby man Sean Atkinson is selling his home for just 18 bitcoins, which amounted to around £81,305 at the time of going to market. “For me it seems like a much better longer term investment,” he said. “Unfortunately, I can’t do the entire sale in Bitcoin, due to the process I have to go through with my with solicitor, which means there is also a cash payment required of £100.”
At the other end of the spectrum, a six-storey Notting Hill mansion is up for sale with a £17m price tag, but the seller is only accepting bitcoins as payment – around 5,050 bitcoins. It is thought to be the first London property to have gone on the market where cryptocurrency is the only accepted payment.
What is Bitcoin?
Bitcoin is a type of cryptocurrency that enables users to make peer-to-peer transactions without going through a bank. Bitcoins are used to carry out anonymous digital purchases or transfers, and every transfer or purchase is logged digitally – known as blockchain.
In the past, the currency has mainly been used as a way of making money by buying bitcoins at lower prices and selling for higher prices. Now, though, they are gaining popularity as a form of payment for businesses.
One of the major benefits to using bitcoins is that it’s much more straightforward – there are no credit limits or charges that you would be subject to if paying by credit card, no need for cash, and no extra fees that can be added on without prior agreement between buyer and seller.
However, although it is not illegal, Bitcoin is not classed as legal tender in the UK, and it isn’t covered by any UK regulatory protection. Another issue, more specific to property purchase, is dealing with how stamp duty is paid to HMRC after a bitcoin transaction, and how estate agent commission is paid.
The exchange rate of bitcoins can be extremely volatile and has seen some wild fluctuations in the past – right now the value of one bitcoin is around £5,650, but back in January it was down to around £667.
The owner of the Notting Hill mansion, Lev Loginov, said: “We want to shift all the perceptions on cryptocurrency. We think in future it is going to eliminate the need for solicitors and property titles and is really going to change how real estate transactions are conducted.
“We would like to be the first company to transact in Bitcoin. It can be done quicker, more efficiently and it is much easier to deal with than using banks, which are putting in unnecessary over-regulation.”
So far, the main interest for Lev’s house has come from Asia, with the majority of enquiries from people under 30, indicating an unusually young demographic that is probably attracted by the Bitcoin price tag option. The house had 15 viewings in one week, an unprecedented amount for a property at a time when London prime property is seeing a slump.
Ed Casson, the group sales director for Go Homes who is behind the new-build Colchester house up for sale, thinks selling properties for bitcoins will grow in popularity over the next five years.
“Our industry has largely remained unchanged in terms of innovation in the last 50 years,” he said. “We are taking an opportunity to embrace this technology. We’re offering someone the opportunity to pay for a new home with Bitcoin. Maybe it’ll be somebody who took a chance when Bitcoin were launched and now want to cash them in.”
However, some industry experts warn that the volatility of the value of bitcoins could be a barrier to its growing popularity.
Saurabh Saxena, founder of residential proptech startup Houzen, said: “Real estate is a low- to medium-risk asset class, and offers low to medium returns. Bitcoin is extremely volatile, and hence very, very high risk as a transaction medium.
“If the value is fixed, then a bit of global reach would make it acceptable for the industry, but it’s not — the value goes up and down every day.”
Senior market analyst at eToro Mati Greenspan believes the volatility could even out when Bitcoin adoption reaches its full potential, but this could be quite far into the future.
“More and more people are coming into the market on a daily basis and there are still many people who are intrigued but still on the sidelines. A bubble only ends once all the players have maxed their positions, and we’re still very far from that.”