On the international level, it may appear to some people that the real estate markets are for the most part transparent. Unfortunately, this is not always the case when comparing real estate markets in various countries, worldwide.
Major countries such as the United States and the United Kingdom push for more transparency. They set the precedent for other countries to strive for. It is an exciting time for real estate investors. The opportunity to utilize new technology such as blockchain is being pushed. Through its use, real estate markets all over the world may see an increase in transparency.
There are also other tools that can help investors make better decisions. Transparency is a substantial factor to take into consideration. For example, Jones Lang LaSalle, or JLL, is an American real estate investment management company. It offers extensive information about the global real estate market.
Global Real Estate Transparency Index
Every year, JLL releases their Global Real Estate Transparency Index that helps investors, developers, and corporate occupiers understand which countries have the most favorable environment. The index is based on 139 variables that relates to the transaction process, corporate governance, regulatory & legal frameworks, performance measurement, and data availability. This allows the index to provide users with a quantifiable approach to transparency.
As more investors rely on a transparent real estate market, the need for a platform that ensures transparency will be in high demand. Blockchain technology can satisfy this. The blockchain is an incorruptible digital ledger visible by anyone over the Internet. Every transaction is recorded and can be easily verifiable.
The blockchain is decentralized, making it less susceptible to hacking. The reason for this is that the information stored on the blockchain is not held on a single server by some organization. Millions of computers world wide host the blockchain. Not a single entity.
Vitalik Buterin, the creator of the second most popular crypto currency Ethereum, stated, “blockchain solves the problem of manipulation. When I speak about it in the West, people say they trust Google, Facebook, or their banks. But the rest of the world doesn’t trust organizations and corporations that much. I mean Africa, India, the Eastern Europe, or Russia. It’s not about the places where people are really rich. Blockchain’s opportunities are the highest in the countries that haven’t reached that level yet.”
Blockchian, corruption & smart contracts
In addition to blockchain mitigating corruption, it also can save people time and conflict through the use of smart contracts. Also known as self-executing contracts, digital contracts, or blockchain contracts. This will allow to store and replicate the contracts on the blockchain network, resulting in ledger feedback such as money transferring and the exchange of a product or service.
The integration of blockchain and real estate almost seems like a match made in heaven since they work flawlessly together. Imagine a paperless and secure property sale made entirely over the Internet; achievable through blockchain. It will be possible to make automatic rent payments. As well as service charges through digital leases with a full audit trail using smart contracts.
Through the use of blockchain and all the benefits that come with it, real estate investors may see the Global Real Estate Transparency Index show an increase in transparent markets. The markets that have the most to gain from blockchain technology are the markets that reside in ‘low transparency’ and ‘opaque’ categories.
In countries where corruption is rampant and transparency is opaque, there are serious consequences for the local society, business practices, and potential investment. There is evidence of investors and tenants bypassing countries with lucrative real estate opportunities simply because they lack proper transparency. Instead, investors gravitate towards countries with high standards of transparency such as the United States, Canada, or Australia.
Not only will an increase in transparency bring about better real estate deals for investors but it also plays a significant role in a community’s effort increasing living standards as well as enhancing the community’s well being, according to JLL. With the adoption of technology such as blockchain, there may be an increase in transparency worldwide over the next few decades.