Will Blockchain find a home in the UK Housing Market?

Will Blockchain find a home in the UK Housing Market?

The Housing Market whether it be sales or rental is a complex business with numerous stakeholders. Property Title information is controlled and stored on Land Registry databases. Financial institutions hold their own databases containing, inter alia, ownership details, financial interests, and valuation/condition reports. Estate Agents, Landlords, property Solicitors, Letting Agents and Management companies all too have their own stores of related data.

All of the above listed stakeholders are subject to an ever growing mountain of property market legislation to which is added non-market specific items such as GDPR. The onus for compliance rests primarily on the shoulders of the property's Landlord/Owner or their Agent. The lack of information connectivity within the Market, along with a fear of falling foul of regulatory requirements, slows down transactions, raises costs, and can cause transactions to fail to complete successfully.

Diagram representing the current communication channels between the many parties involves in a property transaction

Whilst the minefield of current legislation, which looks set to continue to grow, is already making life difficult for those mentioned above residential tenants are also affected. In the real world the Tenant understands that the Landlord's position must remain financially viable and thus the bill for any transactional/process costs will probably be footed by the tenant.

In today's residential rental market most properties are still managed offline, those that are managed digitally utilise a large number of non-agnostic management programs that provide little if any interface ability. This means that viewed from above the rental market would appear as an archipelago of small islands with no inter-connecting bridges. The issues faced by Estate Agents maybe somewhat different but the view from above would be similar.

Whilst human nature tends to cling to the present and eschew change it is hard not to reason that any new system which would streamline current processes and cut costs will eventually prevail. Blockchain Technology is the likely contender.

What is Blockchain Technology? – It is a software system that ensures stored information is trustable (not corrupted, nor is it corruptible once on the Blockchain). It will indelibly record transactions/agreements and where necessary issue contracts related to the transaction. Each Blockchain will have public and private areas restricting access to sensitive information say, personal details to only those entitled to see it, (solicitor, bank...) and even then, only to the extent of their requirements

Currently, a buyer makes the property purchase via an Estate Agent and instructs a solicitor. The solicitor engages with the local authority, Land registry, the financing company, the Valuers, and the Sellers Solicitor. In the weeks that follow agreeing a price, communications from any of these named parties will fly around until all of the requirements of the purchase process are finally met. However, within a Blockchain system the Blockchain will effectively provide a common meeting area for all parties to access. All documents (title deeds, answers to enquiries, mortgage offer, Local Authority searches…) would be placed in the Blockchain and verification would be available to all parties without the need for ‘chasing' around to see who had what. Each piece of documentation or information would only need to be provided once meaning the Blockchain will simultaneously reduce duplication and costs, whilst increasing transactional transparency.

Diagram representing how blockchain could improve and consolidate communications between the many parties involves in a property transaction

Successful completion of the sale would be automatically confirmed to all parties including Land Registry who, incidentally, are already in the process of developing their own blockchain platform which will contain details of all properties in the Country.

In the Property Rental market Blockchain will provide a similar service to Landlords, Tenants, Letting Agents, Property Management companies, and permitted regulatory bodies. In addition the Blockchain, at the push of a button, would be able to provide a download of all a specific tenancy's related information and documentation needed for dispute resolution. Deep rooted consensus protocols embedded within the Blockchain mean that validation of the information would be automatic.

Blockchain Technology is new and as with all things new it has its detractors. However, when today we see major forward looking Banks appraising and processing property deals on their own Blockchain platforms, Land registry moving towards Blockchain, and the rise of Smart Contracts it is hard to imagine that this new technology will not soon become the transactional norm in the housing market. Blockchain will not replace the current stakeholders but it will make their lives easier.

Blockchain Developers are growing in number and with Chainlify's Blockchain-as-a-Service Platform facilitating easier access to Blockchain for developers moving into this field the number is set to balloon. Given the importance of the Housing Market and the huge financial and social impact it has across all sections of the population it is likely that Blockchain Platforms focussed on the property market will be amongst the first routinely available products off the shelf. And, as with most things new, it will be those that bravely grasp it first who will profit best.

By Glyn Craig on 18 October, 2019

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