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The Knox Group of Companies, with headquarters in the Isle of Man, announced late on Tuesday it will launch a residential and commercial property development in Dubai valued at £250 million (Dh1.19 billion), with residences that can be purchased in the digital currency bitcoin.
The company said the 2.4 million-square-foot property venture called Aston Plaza and Residences, consisting of two residential towers and a shopping mall, will be the first major real estate development that will accept bitcoin as payment.
The Dubai project is one step toward efforts to push bitcoin into the mainstream. Maligned and ridiculed in its early days, bitcoin hit a record high of US$4,870 on Friday, surging more than 400 per cent so far this year.
The whole project is expected to be completed by late 2019.
“This a great opportunity for the cryptocurrency community to offload some of its significant gains, especially the early adopters, and actually deploy them in hard-core assets which I’m building,” said Knox’s chairman, Doug Barrowman.
Mr Barrowman, originally from Scotland, in 2008 founded Knox, which engages in private equity, property and wealth management. The company manages £1.5bn in assets, he said.
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Bitcoin took a wild ride in 2017, reaching a record high above $19,800 in December and then plummeting below $11,000 in the same month.
The cryptocurrency isn’t just a risky investment opportunity for the adventurous; it’s becoming an alternative way of paying for regular things. Over 100,000 merchants worldwide accept bitcoin, including Microsoft, Expedia and at least one Subway sandwich shop.
You can also buy a house with bitcoin, and it’s not as hard as you may think. You just need one thing: For the buyer and seller to agree on exchanging bitcoin for the property.
Consider the first single-family home sale in Texas involving bitcoin, announced in 2017: “The challenge, which actually wasn’t all that challenging, was to figure out who would do an exchange that large,” J Kuper, broker at Kuper Sotheby’s International, told CNBC’s Diana Olick.
The parties involved completed the transaction with BitPay, which turns bitcoin into dollars, because the seller wanted U.S. dollars, Olick reports. BitPay has handled other real estate transactions, including a Lake Tahoe property that sold in 2014 for 2,739 bitcoins, or $1.6 million.
For one real estate owner and developer in Manhattan, BitPay won’t be necessary. Benjamin Shaoul of Magnum Real Estate Group says he has buyers who want to pay with bitcoin, and he plans on keeping it.
“I think it will become a long-term means to make payment,” Shaoul told Olick.
All the same, since the idea of using virtual currency to purchase real estate is so new, there is a “still a lot of nervousness for newcomers to the currency,” Olick reports, adding “much of the concern may be around the lack of regulation so far in cryptocurrency and the lack of understanding as to how gains in bitcoin are taxed.”
Some experts warn that buying real estate with bitcoin won’t be simple in every case. As Open Listing notes, “Even if you are able to find a seller that’s willing to accept your offer in bitcoin, it can be tricky to find title insurance and escrow companies who feel comfortable handling virtual currency transactions. To take on your home purchase, they may require you to cash out your bitcoin so that your transaction can be treated more like a traditional house purchase.”
But at the end of the day, if you want to buy a house with bitcoin, there are ways to make it work.
When luxury brokerage Sotheby’s International Realty announced in September it had facilitated one of the first U.S. home sales for bitcoin, the dollar value of a single bitcoin equaled $3,429.
Since the sale of the home in Austin, Texas, for which the sales price was never disclosed, the value of a single bitcoin—a cryptocurrency backed by an online ledger called the blockchain—has quadrupled to over $13,800 and turned a swath of early adopters into millionaires in a matter of months. At one point earlier this month a single bitcoin was worth as much as $19,200.
One of the first purchases people make with their bitcoin windfall: A home, experts say.
“Real estate is the first impact I see for this nouveau riche,” said Joe Kelly, who co-founded Unchained Capital, a startup that allows bitcoin owners to borrow against their cryptocurrency.
The process is fairly straightforward for the homeowner involved in a blockchain currency transaction. It’s the buyer who faces more nuance as he or she weighs the tax implications and other considerations before trading their coins in for square footage, experts say.
In Miami, for example, a financier is seller a 950-square-foot Miami condo with a price of about 60 bitcoins, said Douglas Elliman broker Dean Bloch.
“My seller has been in finance for the past 25 years and he’s decided to sell this place just for bitcoin,” Mr. Bloch said.
The seller owns three other homes and is using the sale of the Miami condo as a way to acquire cryptocurrency, the agent said.
Once they get a suitable offer, the transaction works like an all-cash purchase, but instead of using bank accounts, the buyer transfers bitcoins to the seller’s digital “wallet,” which takes about 15 minutes.
The seller would also need a lawyer at the closing—who might accept fees only in dollars rather than bitcoin—and/or find a title insurance company to underwrite the sale, Mr. Bloch said.
A two-bedroom condo traded hands in December for 17.741 Bitcoin, or the equivalent of $275,000 in what Brown Harris Stevens agents Stephan Burke and Carol Cassis said on social media was the first “bitcoin to bitcoin” real estate transaction in the U.S. In past sales that involved bitcoin, the buyer converted the cryptocurrency to fiat through websites like Coinify or Bitpay before closing the sale.
Sellers accepting bitcoin, however, should keep a sharp eye on the daily fluctuations in the currency’s value due to its volatility. They can hedge against potential devaluation by adding a bitcoin premium to the asking price.
BUYING WITH BITCOINS
By contrast, the nouveau riche looking to get something tangible out of their cryptocurrency investment have a bit more to consider.
If a seller won’t accept bitcoin outright, then a buyer needs first to sell to a third party for U.S. dollars, euros or another fiat currency.
Property site Redfin reports that its brokers have facilitated a number of deals where buyers sold bitcoins to make the down payment. For instance, one buyer sold two coins, each for over $7,400, to make the down payment on a home in Carlsbad, California.
Not every exchange has gone so smoothly, however. Redfin Agent Carina Isentaeva, based in San Francisco, saw a deal for a luxury home in Silicon Valley fall through when the client couldn’t sell bitcoins in time to make good on his offer.
Even a direct exchange of property for bitcoins holds tax implications a buyer should consider, said Robert W. Wood, a San Francisco-based tax lawyer.
The U.S. government recognizes bitcoin as property and officially under the new tax law starting Jan. 1, 2018, anyone trading cryptocurrency would trigger a capital gains tax.
Mr. Wood compared buying property with cryptocurrency to trading IBM stock for a new home. The home buyer would pay roughly 20% in capital gains tax and another 3.8% net investment tax on the amount their bitcoins had appreciated since they first bought or mined for them. That could be one doozy of a tax bill if the trader got into the crypto game when infant bitcoins were worth less than a dollar.
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You read that title right. In a PR stunt of the decade, a real estate company called Aston Plaza Crypto is riding the Blockchain mania in Dubai and has partnered with BitPay to sell property for Bitcoin in Dubai’s Science Park, a district 20 minutes away by car from downtown Dubai.
It looks like 2017 is shaping up to be the year of crypto: first, we had Paris Hilton advertising ICOs, and now we have apartments being sold for cryptocurrencies in Dubai. I think we can all agree that Bitcoin is finally hitting mainstream audiences with all this news.
Currently under construction, the 250 mln sterling pound project is set to be home to two towers and a mall. The 40-floor towers will include luxury studio apartments as well as one and two bedroom open plan apartments. As of this writing, the cheapest studio is going for 28.15 BTC (approximately $127,500), while the largest two bedroom apartments are selling for around 75 BTC.
Aston Plaza is a joint venture between the Isle of Man based Knox group and Baroness Michelle Mone, a British member of the House of Lords. In an interview with CNBC news, the Baroness said that Bitcoin is “the currency of the future.”
“I think because everything is logged and registered, everything’s transparent, that I wouldn’t be getting involved in it — especially from the House of Lords element, I’m a Baroness — so I wouldn’t be getting involved in it if it was a kind of ‘dodgy’ industry.”
By mimicking a real-life ICO, the joint venture has offered up to a 20 percent discount on these under-construction properties to early birds paying in Bitcoin. Of the 1,133 apartments, 480 have already been sold in fiat, while the remainder are up for grabs for Bitcoin enthusiasts.
Across the globe, the business behind real estate has always been traditional and boring, but this is all about to change as more and more countries are looking into testing a way to buy and sell land and house deeds more securely and efficiently on the Blockchain.
Aston Plaza is not the first to take advantage of the Blockchain’s hype factor for real estate. Take Omar Kassim for example: In 2011, he founded JadoPado, a UAE-based e-commerce platform that was recently acquired by the Dubai billionaire Mohammad Al Abbar as part of an effort to launch a competitor to Amazon in the Middle East.
Today, Omar is working on an open source real estate asset management business platform called Esanjo.
And Omar is not the only one. In fact, there have been rumors that Smart Dubai, the initiative created by Dubai’s ruler, Sheikh Mohammed Bin Rashed, is working on a way to transfer property ownership directly over the Blockchain.
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Despite warnings of a bubble and massively fluctuating values, bitcoin continues to fascinate investors and new industries. And now the housing industry is starting to dip its toes into the water.
One Miami condo seller is only accepting Bitcoin offers, while online real estate brokers say several other listings are willing to accept bitcoin as a payment option. (A residential/commercial property in the Isle of Man is also accepting the digital currency.)
But how many bitcoin does it take to actually buy a house? The national median home price in November 2017 was $248,000. Using the midday price of bitcoin (as reflected on CoinDesk) on Jan. 15, that works out to 17.65 bitcoin.
National averages aren’t a lot of good in some areas, though. We gathered median prices for November 2017 in a number of states and cities to find out how much home your Bitcoin would buy.
San Francisco – $1.588 million (per Paragon Real Estate Group) / 113 bitcoin
Seattle – $725,000 / 51.6 bitcoin
Los Angeles – $583,000 / 41.5 bitcoin
Washington, D.C. – $550,000 / 39 bitcoin
Phoenix, AZ – $243,000 / 17.3 bitcoin
Connecticut – $247,500 / 17.6 bitcoin
Florida – $240,000 / 17 bitcoin
Illinois – $185,000 / 13 bitcoin
Iowa – $153,250 / 11 bitcoin
Kansas – $200,451 / 14.3 bitcoin
Maine – $200,000 / 14.2 bitcoin
Massachusetts – $384,000 / 27.3 bitcoin
Michigan – $182,761 / 13 bitcoin
Missouri – $190,050 / 13.5 bitcoin
New Jersey – $300,000 / 21.4 bitcoin
New York– $254,000 / 18 bitcoin
Ohio – $174,689 / 12.4 bitcoin
Texas – $213,396 / 15.2 bitcoin
Utah – $277,000 / 19.7 bitcoin
Vermont – $221,000 / 15.7 bitcoin
Virginia – $270,000 / 19.2 bitcoin
Washington – $363,200 / 26 bitcoin
Article by Fortune:
It made headlines around the globe when Dubai became one of the first in the world where residential real estate could be bought and sold in bitcoin or similar digital currencies. In September, the Aston Plaza and Residences development in Dubai Science Park began offering off-plan studios and one- and two-bedroom units starting from around 30, 50 and 70 bitcoin, respectively. This was at a time when one bitcoin was worth around $4,940 (Dh18,142.15).
After the massive year-end rally of bitcoin, the most expensive unit in the development, a 132.6-sq-m, two-bedroom residence on the 31st floor, had an off-plan asking price of just 21.97 bitcoin as of December 11, which is equivalent to $376,000. “Prices in bitcoin vary because they’re pegged to the US dollar and are updated in real time,” explains Michelle Mone, a businesswoman from the UK and partner in the project led by British property management and investment holding Knox Group of Companies.
This, in fact, makes her online bitcoin price list look more like stock market prices rising and falling continuously. However, Mone says that paying in bitcoin for this development is just an option for a limited number of apartments. The offer is meant to open an avenue for the cryptocurrency community to divest some of their bitcoins into tangible, physical assets. Depending on demand, there will be more units to be offered in bitcoin, says Mone.
For the developer, the risk of dealing with bitcoin payments is minimal as payments are converted immediately to US dollars after the deal is closed. The transactions for the Aston Plaza development are done via US-based bitcoin payment service provider BitPay.
More recently, MAG Lifestyle Development said it is ready to accept payments in Islamic cryptocurrencies, including OneGramCoin. The developer also announced last month a 5 per cent discount for “digital” buyers in any of its eight current real estate projects.
There are two drivers that open the real estate market for bitcoin. One is that more progressive cities all over the world are beginning to adopt laws to allow the technology to be used in property deals, or do not set regulations hindering digital currency payments at all. Apart from Dubai, these cities include New York and Miami, selected cities in Europe, particularly London, as well as Australia, New Zealand and some in the Caribbean.
The other driver is the emergence of brokers and bitcoin exchange portals where members now offer real estate for bitcoin. Some realty companies, primarily in the US, are also experimenting with cryptocurrencies for purchases and rent payments. Their main target are millennials or generally people who grew up in a digital environment, i.e. tech-savvy and those who own substantial bitcoin.
Lev Loginov, co-founder of family office London Wall in the UK capital, made headlines in November by offering a $23-million mansion near Portobello Road in Notting Hill, an affluent neighbourhood in West London, to be paid only in bitcoin. Requests for viewings came almost exclusively from people under 30 years old, most of them of Asian descent. “Most of them made money from mining cryptocurrencies and basically they’re looking to acquire assets,” Loginov told CNBC in an interview, adding that accepting bitcoin also helps attract young affluent millennials to property investment.
The first real estate broker to take up cryptocurrency in New York, sells condominiums in Liberty Toye, a new Lower East Side development, for between $700,000 and $1.5 million in bitcoin. Ben Shaoul, president of New York broker firm Magnum Real Estate Group, has no reservations accepting cryptocurrency, but admits it is mainly a progressive marketing tool to gain an edge on the competition. “Over the next five or 10 years, I could see up to 25 per cent of real estate payments being made in bitcoin or a similar digital currency,” Shaoul said.
Online portals that facilitate real estate purchases using bitcoin have been popping up, with one of the largest, bitcoin-realestate.com, marketing real estate payable either in US dollars or bitcoin and two other popular cryptocurrencies, ethereum and litecoin. The portal offers a wide range of choices, from a beach villa in Costa Rica to a city condo in Bangkok, a mansion in Scotland, a French chateau, a Hong Kong penthouse or an ocean view apartment in Curacao.
That said, bitcoin has also emerged as a tool for buying big-ticket items, and as such has piqued the interest of the wealthy. Bitcoin has also emerged as a cheaper alternative to transfer large sums of money, avoiding fees and complicated and sometimes protracted transactions in traditional channels.
As bitcoin bypasses banking networks, transaction fees are as low as 1 per cent and transfer time is reduced to a few minutes. There is no paperwork and the transfer of value across the globe is frictionless and instantaneous, which means a buyer from Dubai could sign a contract for an apartment in London or a Tuscany farm mansion with a mouse click and without the need for currency conversions, banks and agents.
This convenience has awoken the interest of realty agents and real estate administrative bodies who are now looking closer into the advantages of blockchain technology, the nerve string of any cryptocurrency network. Some even believe that bitcoin will disrupt the entire industry when combined with smart contracts and blockchain-based data storage, which would radically improve transparency, speed and security of property transactions.
Here is where governments come into play to revisit the systems currently in place. The opportunity is that blockchain-based property transactions take away the need for third parties that currently make buying and registering real estate a cumbersome and costly process. As of now, real estate deals are paper-based and involve brokers, escrow agents, lawyers, notaries and banks; on the other hand, a blockchain-based process would allow people to transfer funds, property titles and data digitally, safely, reliably and far less costly in a convenient peer-to-peer manner. It also prevents forgery or malfeasance of any form as transaction records in blockchain are unchangeable.
“Blockchain will allow truly digitised property ownership and exchange, as well as data transfer,” says Ragnar Lifthrasir, founder and chairman of the California-based International Blockchain Real Estate Association (Ibrea), one of the driving forces in the global adoption of blockchain in the real estate industry. “It gives real estate stakeholders more transparency, liquidity and profitability and enables the next evolution of the real estate industry.”
In October, Ibrea presented at the World Blockchain Summit in Dubai, and the Dubai Land Department (DLD) is now developing a system that will record all local real estate contracts on blockchain, making the UAE one of the first two countries to do so, with the other being Georgia.
Dubai ultimately aims to secure all government documents on blockchain by 2020, and the DLD has been tasked with implementing blockchain to gain the confidence of global real estate investors. “Our aim is to unite all real estate and department services on a single platform,” said Sultan Butti Bin Mejren, director general of the DLD, during the launch of its blockchain initiative in October. “We hope to complete our project in 2019-20.”
The technology allows investors to verify property data that is backed by timestamp signatures, enhancing the transparency, accuracy and credibility of transactions, the DLD said. Buyers and tenants will be able to make payments electronically and not write cheques. The process would be completed in a few minutes at any time and from anywhere using a single platform, removing the need to visit any government entity.
article by Gulfnews.com