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Cryptocurrency starts to make a splash in luxury housing. Will it trickle to larger residential and commercial markets? – The Business Journals

As Bitcoin and other digital currencies are gaining in popularity and usage, the real estate industry may increasingly look to capture a bigger share of that $2.5 trillion market.
Residential developers and even some commercial firms have starting to publicly accept cryptocurrency in dealmaking, whether from someone purchasing a luxury condo in Miami Beach, Florida, or from an office tenant paying rent.
“It finally feels like it’s real,” said Erin Sykes, chief economist at New York-based residential and commercial brokerage firm Nest Seekers International. “We’ve seen it, we’ve heard about it for a few years, but you weren’t really seeing transactions happen. You weren’t seeing (anyone) advertising that they accepted cryptocurrency. Now, they’re pushing it out there and saying, ‘Hey, we’re open and available for multiple types of transactions, not just cash or traditional mortgages.’”
That added visibility could help bolster adoption of cryptocurrency in, particularly, new-home sales and pre-construction deals. It’s easier to transact with cryptocurrency with a developer than an individual selling an existing home.
“The developer accepts it and immediately converts it to cash,” Sykes said. “The vendors aren’t accepting crypto yet but (developers) will accept it to attract a whole new, younger segment, generally, of the population.”
Miami has been the forerunner in the United States on real estate projects accepting digital currency for payments. New York-based Property Markets Group Inc. last summer said it would accept cryptocurrency for condo deposits at its E11even Hotel & Residence project. PMG is also accepting cryptocurrency at the planned Waldorf Astoria Hotel & Residences Miami project.
Sykes said that’s, in part, owing to the visibility of cryptocurrency in the Miami market. Miami Mayor Francis Suarez said he would take his entire salary in Bitcoin last year and, she said, has made efforts to lure Silicon Valley companies to the city, which has become a crypto hub of sorts.
Digital currency may also become more widely adopted for international real estate transactions, as U.S.-based investors, seeing a big run-up in price appreciation domestically, look to places like Mexico, Portugal and London for opportunities, Sykes said. Using cryptocurrency for international deals is logical, as those transactions are difficult because each country has different banks, regulations and processes, she added.
There remain challenges and skepticism about using digital currency in real estate deals. It’s also unclear what kind of regulations could be coming for cryptocurrency, which has gained traction in large part because of its decentralized nature. It’s also not clear whether it will transcend the upper end of the housing market.
Daryl Fairweather, chief economist at Seattle-based Redfin Corp., said the headlines of cryptocurrency being used in residential real estate seem, to her, gimmicky right now.
“I don’t see how it makes buying and selling a home easier,” Fairweather continued. “Maybe it will come later, maybe the technology will be there.”
It’s possible, she added, cryptocurrency could make the escrow process easier and less costly, but she hasn’t seen that play out yet so far.
But more buyers are using proceeds from selling cryptocurrency to buy real estate. Redfin recently found 11.6% of first-time buyers in the fourth quarter of 2021 said selling cryptocurrency helped them save for a down payment. That’s up from 8.8% in the third quarter of 2020 and 4.6% in the third quarter of 2019.
Fairweather said, as affordability has become harder to come by in the housing market, the firm wanted to look at what methods, beyond savings and gifts, first-time buyers were using to help pay for a downpayment.
Relying on sales of cryptocurrency can be a risky way to save for a home purchase, Fairweather said, but some buyers have found success in selling cryptocurrency and putting those proceeds into a new house.
“Many cryptocurrencies are very volatile,” she said. “If you have the crypto to cash out for a downpayment, I would do it if it would allow you to buy a home.”
So far, much of the buzz around cryptocurrency in real estate has been the luxury segment of the for-sale housing market. But a few early adopters in commercial real estate have begun to accept crypto in transactions.
Harbor Custom Development Inc. of Gig Harbor, Washington, will soon begin accepting 13 digital currencies as payments for its listed land, development lots, houses, condos and apartment buildings across multiple states it works in.
“We see the writing on the wall that cryptocurrency and blockchain technology, in some form or another, is here to stay,” said Jeffrey Habersetzer, chief operating officer of Harbor Custom Development, in an email. “Opening access to the $2.5 trillion cryptocurrency market is a logical first step for the company, and we are excited about catering to these new buyers.”
Habersetzer said the reception thus far, ahead of the program’s Jan. 24 launch, has been positive. He said he anticipates cryptocurrency buyers to run the gamut: first-time homebuyers searching for a starter condominium, move-up buyers that need more space, luxury homebuyers and Institutional investors looking for entitled land, developed lots or multifamily projects.
But, Habersetzer said, there seems to be a lot of apprehension in the marketplace right now to accept digital currency. He said the firm has partnered with a team of industry experts to create a process that’ll look very similar to a standard cash real estate transaction, with low barriers to entry to those with significant cryptocurrency holdings.
San Diego-based REIT Presidio Property Trust Inc. (NASDAQ: SQFT) last month said it would begin accepting cryptocurrency for tenant payments and common area maintenance charges. The firm is now accepting currencies that include Bitcoin, Ethereum, Dogecoin and Litecoin.
Attempts to reach Presidio by deadline for more information about its program were unsuccessful.
“We believe that these additional payment options will be attractive to some of our current and prospective tenants, especially in new, expansion markets,” said Gary Katz, senior vice president of asset management of Presidio, in a statement last month.
Sykes said she thinks there’s perhaps even more opportunity for commercial real estate to adopt cryptocurrency than the residential market. But it’ll take optimization across different points of a transaction — owners, contractors, tenants and so on — for it to become widespread, she added.
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