Crypto Real Estate Is Here – Bitcoin Mortgages Are Just The Beginning - Forbes | Canada News Media
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Crypto Real Estate Is Here – Bitcoin Mortgages Are Just The Beginning – Forbes

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As cryptoassets continue to become increasingly integrated into mainstream financial conversations, financial markets, and are adopted by financial institutions, it is simply a matter of time before more sophisticated financial instruments make their debut. Even while bitcoin and crypto exchange traded funds (ETFs) continue to languish under regulatory review, other products and services have raced ahead. Decentralized finance (DeFi), non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs) are just a sampling of the blockchain related asset classes that have dominated market conversation since 2021. Add in the discussions around Web 3.0 and the tokenization of both virtual and physical assets, and the result is a potent whirlwind of crypto conversation.

One such instrument that might be flying under the collective radar of market participants, however, is the potential for bitcoin and other cryptoassets to play a role in the mortgage and broader debt-collateralization space. With housing prices on a red-hot streak upward during the last several years – causing echoes of concerns last voiced in 2007 – the intersection of crypto and real estate has also been on the rise.

Let’s take a look at some of the major trends driving this convergence of crypto with real estate, and what investors should keep an eye on moving forward.

The future is now. On the surface the convergence of cryptoassets and mortgage financing might seem like a futuristic pairing, but the reality is that blockchain and real estate are already coming together. From straight forward cases of individuals buying real estate using cryptocurrencies, to NFTs playing a role in reducing paperwork linked to title and title insurance, to blockchain serving a key role in the record keeping process, the implications for real estate are substantial.

In addition to these connections, as significant as they are, the potential for crypto collateralized mortgages is still an emerging use case that remains untapped at large scale. NFTs have a very real role to play in tokenizing the ownership of real estate assets, and are already moving far beyond simply being relegated to crypto art speculation. Mortgages secured by crypto are a logical next step in the maturation of cryptoassets, but as with any instrument the specifics will vary.

Details will vary. Neither mortgages nor crypto are a simple market to understand, and especially when combining complex topics it is critical that the specific details of every transaction are examined. The crypto mortgage market is no exception to this rule, as several different options are available for potential buyers looking to collateralize a purchase using previously acquired cryptoassets.

For example, there are options that require 100% of the requested financing to be collateralized by crypto holdings; a $1 million mortgage loan would require $1 million of crypto as collateral. Other options allow customers to borrow against crypto holdings to produce a down payment, and to finance the remainder of the mortgage using conventional means.

On top of the borrowing specifics, investors and borrowers should also research the process that occurs if the value of collateral drops below a pre-determined level. Are the cryptoassets held on deposit at the crypto mortgage lender, or at a trusted third-party? If the price of this collateral breaches a certain level, is the crypto liquidated or does the borrower have an opportunity to make additional collateral deposits? With volatility a common characteristic of financial assets, including crypto, these are not idle concerns.

Custody matters. Building on the previous points, a question that needs to be asked is what entity has custody over the cryptoassets being used as collateral? Bitcoin

BTC
maximalists and other proponents of self-custodianship will most likely not partake in this financialization, but other crypto investors would be well served to understand just where the cryptoassets are being held. Additional factors to consider are where the custodian is located, what measures are in place to safeguard customer assets, are specific crypto related insurance policies in place at the organization, and has the entity undergone any formal review or attestation of these procedures?

For example, if a crypto investor chooses to not only collateralize a mortgage using cryptoassets, and therefore transfers custody to some external party, but also documents this transaction using an NFT, understanding provenance and custody are essential. With the number of decentralized exchanges and new entrants in the space conducting proper due diligence is an essential step for every investor to conduct.

Real estate and real estate linked financial products are clearly are becoming increasingly influenced by the growing prominence of cryptoassets in mainstream financial markets. There are several underlying use cases that different types of blockchain-based applications can bring in order to improve the current state of real estate transactions. As always, the potential and opportunity of these transactions need to be balanced against the possible risks, but opportunities abound for engaged and proactive investors.

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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