While the internet has made spending money easier than ever, buyers still rate completing a property purchase as one of life’s most stressful experiences. But it doesn’t have to be.
“I believe blockchain and smart contract technology has the capacity to significantly cut down the length of time it takes to buy and sell property whilst boosting the level of efficiency across the conveyancing process,” said Ruban Selvanayagam from Property Solvers.
The technology to make the largest purchase of one’s life as painless as it can be is already in existence – it just isn’t in use. However, recent developments suggest this could be about to change.
The UK has now completed its first blockchain trial, slashing the average property transaction process of three months to only three weeks. This month, Instant Property Network (IPN) completed a global trial of a new distributed ledger-based system. The trial, which was facilitated by blockchain software firm R3, ran end-to-end transactions using test data through a new distributed ledger to simulate property sales over a five-day period.
The first transaction took less than an hour to complete. IPN estimates that if these efficiencies were applied to the global property market it could equate to an annual saving of approximately $160 billion.
David E. Rutter, CEO of R3, said: “There has been plenty of talk about how distributed ledger technology could revolutionise the property industry, but little in the way of tangible results. This trial changes that. Not only has it shown that distributed applications work and the benefits are real and substantial, it has also shown that there is huge appetite in the market to evaluate it.”
In other parts of the world, governments are pushing blockchain technology. Dubai, which built a city in less time than it took the UK to build a runway, could offer a glimpse of what’s to come. Chris Dietz, Executive Vice President of Global Operations for Leading Real Estate Companies of the World, said: “The Dubai Land Department – the Emirate’s property legislator – has recently unveiled plans for REST, or Real Estate Self Transaction, a digitalised platform based on blockchain ledger technology. The system will enable a complete digitalisation of real estate transactions by 2020, eliminating paper documents and reducing brokerage procedures.”
While Dubai may be a world away from UK real estate, its example of early adoption is a good lesson for every market.
“Although this specific initiative is unique to Dubai, the digitalisation of real estate transactions and resulting reduction in demand for ‘pure agency services’ will trickle down to other global markets,” said Dietz. “Agents must keep a close eye on how Dubai businesses are adapting their services and take note, making plans to evolve their business model with changing market conditions, rather than burying their head in the sand.”
Selvanayagam explained that the UK is already waking up to the benefit of blockchain. “Although the Land Registry is somewhat lagging behind other countries in terms of rolling out similar technology, there has been a concerted effort to get the wheels in motion,” he said. “Although significant investment will be necessary, it’s hard to deny the huge benefits that incorporating blockchain into the conveyancing process will bring to the house sale process.”
A number of solicitors have claimed that new build home conveyancing is more complex than any other type of conveyancing. However, blockchain technology could transform it into the simplest.
“Few would deny that house conveyancing remains a bureaucratic haze,” said Selvanayagam. “With property title fraud also costing the Land Registry approximately £10 million per year in indemnifying homeowners, the need for reform is unquestionable.”
Lisa Simon, Head of Residential Sales, Carter Jonas, added, “In order to make changes for the better, the industry must first evaluate the conveyancing process and the ways in which we can streamline what is broadly perceived as slow and laborious within the timeline of a house sale.
“With buyers, bankers and solicitors all playing a part in the journey towards the purchase of a property, there runs a risk of ‘too many cooks’. There is a gap yet to be filled by the PropTech community in exploring how conveyancing can be optimised, which could in turn bolster the volume of transactions in the market.”
According to new research by Strutt & Parker, verification is where intelligent document processing and blockchain technology could have a significant impact.
“As every party in a transaction can trust the information, it has the potential to reduce time and costs,” Vanessa Hale, Director of Research Strutt & Parker said. “There are still hurdles to overcome with blockchain, especially when it comes to binding digital signatures, but HM Land Registry is consulting on rules to allow this type of innovation. And by using artificial intelligence and automation to process documents, the time required for compliance when buying a new home could become almost non-existent.
“All of this ground-breaking technology is already available – so it will be fascinating to see how the property industry adapts around it over the next 10 years.”
Teal Legal is one such company looking to make inroads. Backed by government funding through UK Research and Innovation, the ‘AI Conveyancer’ will consume large chunks of conveyancing data to automate the due diligence element of the conveyancing process.
Sally Holdway, CEO of Teal Legal said: “Whether the market actually wants ‘instant conveyancing’ is a moot point. We are firmly of the view that when a property sale completes should be in the hands of the parties to the transaction. However, they shouldn’t be waiting around for the legal work to be finalised, which is what happens in most cases today. We absolutely see a future where properties can be marketed as ‘conveyancing ready’ because tools like our AI Conveyancer have crunched the data to work out whether a property is ‘good and marketable’ well before a buyer is even found.”
Blockchain is often hyped up to be as big as the internet; however, if housebuilders ask themselves how much the internet has changed the antiqued conveyancing process, they are right to be cynical about the impact blockchain could have. Nonetheless, believing just a fraction of the hype warrants profound questions about how blockchain will influence buyer behaviour in the near future.
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