Tokenisation as a revolutionary approach for property investments

The property sector is traditionally regarded as one of the most stable and consistent asset classes with reliable returns. Nevertheless, it is often associated with high barriers to entry and low liquidity flows. Advancing digitalisation and the development of blockchain technology are opening up a new, promising dimension of real estate trading: tokenisation.

New ways of investing in real estate: tokenisation as a model for the future

The tokenisation of real estate has the potential to fundamentally change the property sector. With increased liquidity, access to larger markets, greater transparency, cost efficiency, diversification opportunities and faster transaction times, it offers significant benefits to investors and owners alike. "This innovative approach has the potential to fundamentally change the way property is invested in," explains Christian Sommer, Managing Director of Engel & Völkers Vienna Commercial.

Tokenisation refers to the process by which a physical or digital asset is broken down into smaller, tradable units - known as tokens - that exist on a blockchain platform. In the context of the property industry, this means that a property is divided into a certain number of digital tokens, each representing a share of the total value," Sommer continues. These tokens can then be bought, sold and traded by investors, similar to shares on the stock exchange. Tokenisation thus not only adds an alternative investment model to the real estate sector, but also enables its players to gain profitable business advantages:

Increased liquidity: One of the biggest advantages of tokenisation is the significant increase in liquidity for investors. Traditional property investments are often difficult to liquidate, as the process of selling a property is often lengthy and complex. "Tokenisation allows buyers to trade their shares quickly and easily via digital marketplaces. This leads to more flexible and dynamic asset management and makes it possible to react more quickly to market changes," emphasises the property expert.

Expanded market access: Tokenisation opens up greater market access and broad property portfolios for investors. Instead of having to raise a large amount of money to buy a single property, investors can invest smaller amounts due to the lowered barriers to entry. This fragmentation of property ownership allows a more diverse investor community to benefit from the advantages of property investment, making the property market more inclusive and accessible to a variety of players.

Increased transparency and security: Blockchain technologies offer the property market a high degree of transparency and security. All transactions are recorded in a public, unchangeable register on decentralised computers. "This improves traceability and protects against fraud. Buyers can track the entire transaction history and ownership of property tokens. This transparency not only strengthens trust in the market, but also offers a high level of security for all parties involved," says Sommer, citing another positive effect of the implementation of tokenisation on the Austrian investment market.

Increased cost efficiency: In addition to the factors already mentioned, tokenisation also has the potential to significantly reduce the transaction costs associated with real estate transactions. Traditional contracts often require the involvement of estate agents, notaries, banks or other intermediaries, which entails additional fees. The use of smart contracts - self-executing contracts that define the terms of the agreement directly in the code and execute automatically as soon as the predefined conditions are met - eliminates the need for many of these intermediaries, resulting in a significant reduction in costs.

Easier diversification: Another advantage of the tokenisation of the real estate sector is that it allows interested parties to invest smaller amounts in properties, making it easier to diversify real estate investments. "Instead of investing capital in one or a few properties, the investment volume can be spread across several properties. This reduces the risk and increases the potential for stable returns," says Sommer.

Faster transaction times: Experience has shown that property purchase processes can take weeks or even months to complete. The use of blockchain technology creates faster and automated transactions that can be completed within minutes or hours. This not only significantly speeds up the investment process, but also allows buyers to react more quickly to changes in the market.

"With technology evolving rapidly and regulatory improvements enhancing transparency and security, the future of tokenised real estate is extremely bright. The industry is at the dawn of a new era that could make the property market more accessible, efficient and attractive. In order to remain competitive in the long term, the Austrian property market must also continue to drive forward the implementation of tokenisation in the future," says Christian Sommer, summarising the benefits.