Cryptocurrencies have come a long way since their inception. Bitcoin evolved from a fad to a darknet currency to finally becoming a mainstream store-of-value asset. Today, bitcoin and other cryptos are widely accepted methods of payment by merchants, both offline and online.
Retailers were the first to see the opportunities of accepting bitcoin. This trend has slowly caught on in the real estate industry, starting as early as 2017. In recent years, the possibility of buying a house with crypto via UK retail agents has become a reality. And the growth of decentralised lending services has enabled individuals to use crypto as collateral when taking out loans to buy real estate.
In this article, we take a closer look at this trend, how it evolved over the years, and the different methods at your disposal to buy property with bitcoin in the UK. We will also lay out the reasons for and against buying real estate with crypto and draw a conclusion on this opportunity for investors.
Cryptocurrency for Purchasing Property
Bitcoin as a payment method has come a long way in the last decade. Because of its volatility, merchants have been hesitant to adopt it as a go-to method of payment. Butthe bull market of 2017 was a turning point for cryptocurrencies.
During this period, investors started to register incredible gains and were looking to cash out by buying property as a more stable investment asset. In the UK, real estate agency Go Move started proposing properties that could be bought for crypto.
Accepting crypto for real estate dealings hasn’t really caught on on a mass scale in the UK. Regulations have been slow to emerge, and successfully requesting a mortgage from a bank with your crypto holdings is nearly impossible. But there are various methods of purchasing property with crypto.
Buying a House With Cryptocurrency
As a UK crypto investor, there are three main methods you can use to buy a property with crypto.
The first one is pretty straightforward, and it involves finding a seller that accepts cryptocurrencies as a method of payment. But, since cryptocurrencies are so volatile, most real estate agencies will request that you pay the property in full upon purchase. Rarely (if ever) will you find an agent that is willing to take the risk of the cryptocurrency price dipping between the time of purchase and the payment. So, unless you have a good amount of crypto accumulated, this is not really a viable method for paying for your new house.
Your second option would be to sell your crypto holdings for cash and use it to pay for the property. You can use this cash to buy collateralisable assets such as bonds or stocks and take out a loan from your bank. Only then will you be able to pay out your mortgage in instalments. However, this method doesn’t always sit well with fervent crypto believers. It implies that you will be selling your crypto holdings for stable assets like bonds, which have a lot less profit potential in the long run.
But what if we told you there’s a third, much more user-friendly method of using your crypto to buy a house and keep your crypto at the same time? Well, you can do exactly this by loaning money and using crypto as your collateral on either centralised or decentralised lending platforms.
By locking your crypto funds on such platforms, you can take out a loan to pay cash for the property. Then you will be able to repay this loan and slowly recover your crypto holdings. So, instead of paying a loan to your bank for the house, you will be repaying your loan to the landing platform to recover your crypto collateral. This way, you keep your crypto and buy a house simultaneously.
Benefits of Buying Property With Crypto
There are many benefits of buying a house with crypto. These include:
- Eliminate the middleman. When buying a house with crypto, you can directly deal with the owner of the house and cut costs on broker paperwork.
- Secure and cost-effective transactions. Cryptocurrencies transactions are inherently secure because of the blockchain technology they rely on. Moreover, transaction fees are just a fraction of those of banks, especially for larger amounts of money.
- Increased privacy and transparency. Crypto transactions are immutable and available for everyone to see. However, they aren’t tied to your ID credentials, providing much more privacy.
Drawbacks of Buying Property With Crypto
With that in mind, there are still some serious drawbacks to buying a property with crypto, including:
- Finding an agency that accepts crypto. While several sellers will accept crypto, you are limiting yourself in your choice of properties.
- Having to pay for your real estate in full. Not being able to pay in instalments can be a huge drawback if you don’t have the entire amount saved up in crypto.
- Not being able to take out a mortgage from a bank or any other regulated financial institution. Because cryptocurrencies are unregulated, financial institutions will not take the risk to accept them as collateral.
- Collateralising volatile assets. Even if you manage to take out a loan in crypto, this means that you will be locking up these assets without the ability to sell in case their price crashes.
Future of Real Estate Market and Cryptocurrency
So, the question remains, what does the future hold for these assets when considering the real estate market? Should you buy a house with bitcoin? Unfortunately, there’s no simple answer to these questions. If you are an early crypto investor and wish to diversify your gains, real estate can be a stable asset to rely on. If you have made it big from trading or holding bitcoin, it may be the ideal way to cash out your profits.
That said, the drawbacks are still quite consequential. It’s quite difficult to find a person selling a house for BTC and, more often than not, you will have to dish out the entire sum in one go. Regulations have been really slow to develop, so you might want to wait for the UK government to have a clear opinion on buying real estate with crypto.