A growing number of home buyers are investing in cryptocurrencies like Bitcoin as a way to enter the booming real estate market.
Mortgage brokers in Sydney and Melbourne say buyers have used “coins” online either for a deposit or to pay off a large portion of their mortgages.
Cryptocurrencies, also known as digital coins, can be sent from user to user without a central bank or a single administrator using blockchain technology.
While not recognized as a common currency in Australia, cryptos have grown in popularity and value in recent years, with Bitcoin now worth just over $ 42,000.
There are now over 4,000 cryptocurrencies, with millions of investors, including Australian homebuyers, keen to take advantage of the upcoming digital coin boom.
However, mortgage brokers warn that using digital currency to buy property in Australia is not without its risks.
Marvin Coleman Mortgage Choice Oakleigh in Melbourne said the cryptocurrency markets are extremely volatile.
So much so that a tweet from Tesla Motors CEO and crypto investor Elon Musk, or a comment from former US President Donald Trump, can drop double-digit values and rob thousands of people of investments in a few minutes.
Additionally, banks do not consider coins like Bitcoin, Dogecoin, or Ethereum to be a valid form of Australian currency or savings, which means they are not considered part of a home buyer’s overall finances. .
“We’re obviously at a very early stage of this,” said Coleman. “About 5% of my clients have crypto, so the obvious question is ‘can I use it to demonstrate that I can complete my property purchase?’
“Banks don’t really have a position, and they expect people to have at least 3-5% of the purchase price in their savings.
Crypto trading platforms don’t provide enough evidence of an investor’s holdings, which means banks wouldn’t consider it a financial asset, Coleman said.
People had to consider cashing out, which meant choosing between selling their cryptocurrency holdings or buying a house.
“There are a lot of FOMO [Fear of Missing Out] in the crypto and real estate markets, and a lot of people still want to ride the crypto wave, ”Coleman said. “But I think right now there is a little more nervousness around crypto and the huge FOMO in the real estate market.”
He said clients cashed out their crypto investments to fund a deposit or even pay off a large amount of their global mortgage.
Sydney mortgage broker owner Michael Brown agreed, saying more buyers, including established homebuyers with holdings in cryptocurrencies, were looking for home loans. Some had invested up to $ 300,000 in digital coins.
“I have had three clients with cryptocurrency in the past three months,” Mr. Brown said. “It is absolutely becoming more and more common. “
He expected to see a lot more people investing in both cryptocurrency and real estate in Australia.
“It’s really for people who are looking for a better return than those who sit with money in a term deposit in the bank,” he said.
Young buyers, especially first-time home buyers, were the first to embrace cryptocurrency, said Will Unkles, mortgage broker and director of 40Forty Finance, who added there was a lot to consider. for them.
“I discuss with them that their total deposit at the time of settlement must be present and accounted for,” Mr. Unkles said.
If the money was kept in cryptocurrency transactions and values fell, buyers could be caught without enough money to buy a home they had accepted, he said.
While cryptocurrency was not considered common enough to be used to buy a home through a bank, that could change in the future, Mr. Unkles said.
“Literally three or four years ago it was the same with people buying and renting through Airbnb. Now the banks are accepting it. The mortgage world is slow to catch up, but I wouldn’t rule it out completely.