This year, the cryptocurrency has taken a big step towards mainstream adoption. More and more Australians are just starting to realize the possibilities offered by the blockchain technology on which crypto is based.
One of the great spaces still in the very early stages of connecting with blockchain is the real estate market.
Throughout the Covid-19 pandemic, Australian house prices have continued to soar, despite nationwide lockdowns and rising unemployment.
While the vast majority conduct their business in the traditional way, some are trying a new method of accepting cryptocurrency as a form of payment for their properties.
What does it mean? And what are the implications of this new avenue of buying and selling real estate in Australia?
We will take a look.
Queensland’s Rural Paradise for 30 Bitcoin
Earlier in December, a tropical property in rural Queensland became one of the first properties in Australia to go on sale for payment in cryptocurrency.
The property in question – Aquila Cove, a beautiful beachfront location bordering the Coral Sea, approximately 100 kilometers south of Mackay.
The current owner of the 162-acre property, John Costa, told the ABC in early December that he has been intermittently trying to sell the property for about five years for A $ 2.2 million.
Then in January, Costa’s son introduced him to the philosophy of cryptocurrency and in particular Bitcoin.
Costa then decided to list the property for 30 bitcoin, which at the start of December was equivalent to around AU $ 2,040,013.
Today, less than three weeks later, 30 Bitcoin is equivalent to just over A $ 1.4 million.
Despite this, the real estate agent who is selling the property, Gary Johns, claims that Costa has not increased the amount of Bitcoin he is selling the property for.
Image source: Â© Bychykhin | Megapixl.com
What does it mean to sell property in cryptocurrency?
The move is certainly a new approach to selling real estate, but it’s more than a superficial move and has interesting implications for the future of buying and selling real estate in Australia.
Take the traditional way of selling a property. If you are a seller, you put this property in Australian dollars, either through an auction or a sale, usually with the help of a real estate agent.
Once this property is sold there are a number of expenses including your agent’s commission, marketing fees, and taxes.
During this time, since you are selling the property in Australian dollars, this property is usually sold to buyers in Australia.
Now consider selling a property in Bitcoin. First, comparing Bitcoin to the Australian dollar over the past year clearly shows that Bitcoin is the most valuable currency. In fact, in 2021 alone, Bitcoin has appreciated by around 80%. The Australian dollar, on the other hand, like all fiat currencies, actually depreciates due to inflation.
Of course, as we can see with the Aquila Cove property, the value of Bitcoin can go the other way as well. This is because Bitcoin is a volatile asset. When the Aquila Cove property went on sale for 30 bitcoins, a token was worth around US $ 50,000. Today, a token is worth US $ 47,700.
Throughout this year, Bitcoin has fluctuated from around US $ 30,000 to US $ 69,500 in November.
Over time, however, Bitcoin has grown more than almost any other asset class, including real estate.
Additionally, selling property in cryptocurrency gives the property a wider market as it opens up to an international market.
Throughout the growing popularity of crypto, the Australian Tax Office (ATO) has been forced to catch up with legislation surrounding the crypto space. In new laws passed this year, anyone who has held cryptocurrencies for more than a year receives a 50% reduction in long-term capital gains tax when they sell, trade, or trade them. spend or offer them.
This could mean that buying a Bitcoin home could mean you pay less in capital gains if you hold Bitcoin for a year after the sale. Of course, these are things to discuss with an accountant.
Stamp duty: As cryptocurrency becomes more and more mainstream, there are still some things that can only be paid for in Australian dollars. For example, stamp duty – which is typically around 3-4% of the purchase price. So if you are buying a property in crypto, you will still have to pay stamp duty in Australian dollars.
Large initial cost: If you are looking to buy a property using crypto, you will likely have to pay the full amount up front, without taking advantage of a traditional home loan.
However, earlier this year it was reported that an Australian homeowner had refinanced his Commonwealth Bank loan via a Decentralized Financing Fixed Rate (DeFi) loan through the Notional Finance Loan Protocol. However, this approach is far from user-friendly for those unfamiliar with DeFi platforms.
Volatility: As mentioned earlier, crypto is a volatile asset class. The price of Bitcoin today could be very different from what it will be three months from now.
Therefore, if you want to buy or sell a cryptocurrency property, be sure to agree on what happens if the price of Bitcoin rises or falls significantly during the settlement period (usually two or three months). ).
The bottom line
Selling or buying property in cryptocurrency is not for the faint of heart. There are still a lot of points that need to be properly considered and ironed out.
That being said, as crypto increasingly becomes part of everyday finance, it’s hard to deny that the real estate space will not be heavily affected by crypto and all of its possibilities.