Is it Worth Selling Your Property For Crypto?

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Is it Worth Selling Your Property For Crypto?

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 Is it Worth Selling Your Property For Crypto?
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Highlights 

  • A rural Queensland property was put up for sale at 30 bitcoins, which at the beginning of December was equivalent to about AU$2,040,013
  • In fact in 2021 alone, Bitcoin has appreciated by around 80 percent. The Australian dollar, on the other hand, like all fiat currency, depreciates in value due to inflation
  • In new laws passed this year, anyone holding on to crypto for more than a year enjoy a 50 percent long-term Capital Gains Tax discount

This year has seen cryptocurrency take a huge step towards mainstream adoption. More and more Australians are just beginning to realise the possibilities presented by the blockchain technology upon which crypto is built.

One of the big spaces still in the very early stages of linking up with blockchain is the real estate market.

Throughout the Covid-19 pandemic, Australian house prices have continued to soar, despite nationwide lockdowns and a rise in unemployment.

While the vast majority are conducting their business in the traditional way, some are trying a new method of accepting cryptocurrency as payment for their properties.

What does this mean? And what are the implications of this new avenue of buying and selling real estate in Australia?

Let’s take a look.

Rural Queensland Paradise For 30 Bitcoin

Earlier in December, a tropical property in rural Queensland became one of the first properties in Australia to go on sale for payment in cryptocurrency.

The property in question - Aquila Cove, a beautiful beachside location bordering the Coral Sea, around 100 kilometres south of Mackay.

The current owner of the 162 acre property, John Costa, told the ABC, at the beginning of December, he’d been intermittently trying to sell the property for around five years for AU$2.2 million.

Then in January, Costa’s son introduced him to the philosophy of cryptocurrency and in particular Bitcoin.

Costa then decided to put the property up for sale at 30 bitcoins, which at the beginning of December was equivalent to about AU$2,040,013.

Today, less than three weeks later, 30 Bitcoin is equivalent to a little more than AU$1.4 million.

Despite this, the real estate agent selling property, Gary Johns, says Costa hasn’t increased the amount of Bitcoin he’s selling the property for.

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What Does it Mean to Sell a Property in Cryptocurrency?

The move is certainly a novel approach to selling real estate, but it’s more than a superficial gesture and has some interesting implications for the future of buying and selling property in Australia.

Take the traditional way of selling property. If you’re a seller, you put that property up in Australian dollars, either through an auction or a sale, usually with the help of a real estate agent.

Once that property is sold, there are a number of expenses, including your agent's commission, marketing fees and taxes.

Meanwhile, since you’re selling the property in Australian dollars, that property is generally being sold to buyers in Australia.

Now consider selling a property in Bitcoin. Firstly, comparing Bitcoin to the Aussie dollar in the past year shows clearly that Bitcoin is the more valuable currency. In fact in 2021 alone, Bitcoin has appreciated by around 80 percent. The Australian dollar, on the other hand, like all fiat currency, actually depreciates in value due to inflation.

Of course, as we can see with the Aquila Cove property, Bitcoin’s value can also go the other way. This is due to Bitcoin being a volatile asset. When the Aquila Cove property went on sale for 30 bitcoin, one token was worth around US$50,000. Today, one token is worth US$47,700.

Throughout this year, Bitcoin has fluctuated from around US$30,000 to as high as US$69,500 in November.

Over time though, Bitcoin has risen more than almost any other asset class, including property.

Furthermore, selling the property in cryptocurrency, gives the property a wider market as it becomes open to an international market.  

Tax Breaks

Throughout crypto’s rapidly growing popularity, the Australian Tax Office (ATO) has been forced to catch up with legislation surrounding the crypto space. In new laws passed this year, anyone holding on to crypto for more than a year enjoy a 50 percent long-term Capital Gains Tax discount when they sell, swap, spend or gift them.

This could mean that purchasing a house in Bitcoin might mean you pay less capital gains if you hold onto the Bitcoin for a year after the sale. Of course, these are things to discuss with an accountant.

Other Considerations

Stamp Duty: While cryptocurrency is becoming more mainstream, some things can still only be paid for in Aussie dollars. For example, stamp  duty – which is typically around 3-4 percent of the purchasing price. So if you’re buying a property in crypto, you’ll still be required to pay stamp duty in Australian dollars.

Big Upfront Cost: If you’re looking to purchase a property using crypto, you’ll likely be required to pay the full amount upfront, without the benefit of a traditional home loan.

However, earlier this year, it was reported that one Australian home owner had refinanced their Commonwealth Bank loan through a decentralised finance (DeFi) fixed rate loan through lending protocol Notional Finance. However, this approach is far from user-friendly for those not familiar with DeFi platforms.

Volatility: As mentioned earlier, crypto is a volatile asset class. The price of Bitcoin today might be very different to what it will be three months from now.

Therefore, if you want to buy or sell a property in cryptocurrency, make sure to agree on what happens if the price of Bitcoin rises or falls dramatically during the settlement period (usually two or three months).

The Bottom Line

Selling or purchasing a property in cryptocurrency is not for the faint of heart. There are still lots of points that need to be properly realised and ironed out.

That being said, as crypto becomes more and more a part of everyday finance, it’s hard to deny the real estate space won’t be heavily affected by crypto and all its possibilities.

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