Using bitcoin for a real estate investment?


What should you take into consideration? With Bitcoin receiving more and more attention and boasting impressive leaps in value, should we all be making investments in this cryptocurrency or should we be steering clear? We asked our currency broker partners at IFX International to discuss. IFX please tell us more. [Please note that due to being FCA authorised and lack of regulation IFX International are unable to accept, handle or advise on any form of cryptocurrency but any G7 currency transfer they would be happy to help].

Thanks guys. So, with property vendors and developers seemingly having recently found an appetite to receive funds in Bitcoin; here at IFX we have explored the pros and cons of purchasing property with the leading cryptocurrency. 

LETS START WITH THE RISKS...

Bitcoin’s volatility: Unlike major currency pairs Bitcoin’s movements are almost always exaggerated. Typically; the time needed to purchase a property is between 2-8 months. To strike a comparison the GBP/USD exchange rates trading range over the last 52 weeks has ranged from 1.2106 to 1.4345. Both currencies have been plagued with political uncertainty, questionable policies and events. The range quoted equals an 8.4% movement.

Bitcoin as is well known is extremely susceptible to huge movements with daily movement of 10-15% seen in any one trading day. Today for example (2-2-2018) bitcoin has depreciated -12.83% against the dollar. However, it’s not even lunchtime so your guess is as good as mine as to where it might close!

Bitcoin security measures: Currently you can only purchase Bitcoin via cryptocurrency trading platforms whilst technology and security is improving it can be tricky to guarantee your money is safe. Just this week over $500 millions worth of Bitcoin was stolen by a hacker in Japan. Crytocurrency experts anticipate more of these highly lucrative attacks. Whilst there are companies such as Wallet recovery services have been set up to help retrieve ‘lost’ crypto, response times are slow due to enormous demand.

Legal eligibility of Bitcoin as payment: Having scoured the internet for property for sale in Bitcoin it would appear that although much of the globe is covered the choice is fairly small. If however you do find a suitable you may struggle to find a solicitor or notary able to execute the purchase. Bitcoin is currently completely unregulated and theoretically cannot be considered as legal tender.

Global interest rates remain historically: If you are wanting to raise capital or obtain a mortgage for your Dubai or London investment home, you will find very few lenders who have an appetite or wish to deal in Bitcoin. However, you will almost certainly find interest rates at historic lows. Banks lending criteria has naturally tightened post-crash however with the global economic climate seems to have turned a corner maybe rather than flipping a coin on where Bitcoins’ price might go in order to invest in property, it might be worth considering a loan fixing at low interest rates levels and having price certainty for a few years.

ONTO THE POSITIVES...

It’s not all doom and gloom with regards to Bitcoin in relation to property purchases. If the value drops by 30% in on day/week/month it certainly can, by definition, increase by the same rate at an equally fast pace. For example, if you were to receive payment of $1 million worth of cryptocurrency it could, at this volatile time be worth 20%+ more. If you were to hold the Bitcoin, certain predictions have it to be upwards of $100,000 per coin at some point in time.

Similarly, what this type of currency allows is the seller to be open to a different type of buyer. Typically, due to fraud, compliance and regulatory reasons certain countries find it harder to participate in high level financial transactions. Due to Bitcoin’s anonymity, decentralization and ease of acquirement (usually exchanged from USD) it enables anyone from around the globe with an internet connection to buy some. This then enables any nationality to be able to buy goods and services they previously may not have been able to. Now, we see Indian, Asian and African individuals competing in certain industries and assets classes where they may not have either been allowed or aware of. Property, being a stable, clean and available asset would be of significant appeal to those looking to exchange bitcoin for “real world” currency.

SO, IN SUMMARY...

With both potential gains as well as significant risks our recommendation is not to commit to a bitcoin transaction without taking advice first. Here at IFX we are here to answer all your currency related questions so get in touch today. Contact Andy Sadler asadler@internationalfx.com