Unlocking Stagnant Markets: How Real Estate Token Securities Can Revitalize Unsold Properties
Photo = Hashed Open Research
As the 22nd National Assembly is re-enacting the Security Token Offering (STO) legislation, opinions have been raised that token securities can be used to resolve the unsold real estate situation in local areas.
On the 29th, Hashed Open Research (HOR), a think tank of blockchain investor Hashed, published a report titled ‘Implementation of a sharing economy through real estate token securities and popularization of real estate ownership’, stating, “Token securities are currently not being activated due to legal and institutional limitations.” “Once issuance begins in earnest, various problems existing in the domestic real estate market will be resolved,” he analyzed.
Real estate token securities are security-type products that guarantee a portion of ownership of individual real estate, such as buildings or land, depending on the token holding ratio on the blockchain. Unlike REITs (real estate investment trusts) or funds, which are indirect real estate investment methods, investors can directly select real estate to invest in, and early redemption on distribution platforms such as exchanges is free.
In particular, HOR suggested that token securities could be used similarly to CR REITs (Corporate Restructuring REITs) to solve the liquidity problem in the real estate market caused by the rapid increase in unsold housing.
CR REITs are an investment trust product that purchases unsold properties to support restructuring of construction companies, operates them as leases for a certain period of time, and earns market profits by later selling or distributing them. The six CR REITs introduced during the 2009 financial crisis contributed to resolving the company’s liquidity crisis by purchasing and operating a total of 2,163 unsold houses.
Accordingly, HOR suggested, “In order to solve the problem of local unsold housing, which numbered more than 50,000 units as of August this year, we benchmarked the operation method of CR REITs and issued one token security per unsold house to purchase and operate the house.” did it
In particular, unlike CR REITs, which have low accessibility to token securities, transaction details are transparently disclosed on the blockchain, and investment and redemption are possible easily with small amounts. Therefore, the analysis is that it will be able to increase real estate liquidity faster than CR REITs and contribute to strengthening financial market stability. In fact, in the United States, there are cases of token securities such as RealT, a token securities platform, that converted undervalued residential real estate into tokens and successfully managed them to generate profits.
Yongbeom Kim, CEO of HOR, said, “Token securities are easily accessible to many investors and will help resolve information asymmetry in illiquid assets such as real estate and improve investment governance.” CEO Kim said, “Overseas, such as in the U.S. and Japan, the positive functions of token securities are being utilized in various ways in the real estate market through the improvement of related laws and regulations,” and “If the token securities-related system is completed in Korea, demand for real estate investment will expand and demand will stagnate.” “I believe that various problems that have arisen as a result of this can be resolved,” he said.
Real estate token securities are rapidly becoming institutionalized in the United States and Japan and are showing rapid growth. Deloitte predicts that the global real estate token securities market will expand from $2.7 billion (about 3 trillion won) in 2022 to $1 trillion (about 1,388 trillion won) in 2030. In the United States and Japan, various types of real estate token securities are issued in commercial offices, logistics centers, small single-family homes, lodging facilities, retail facilities, and residential real estate, meeting investment demand of hundreds of billions of won annually.
On the other hand, in Korea, although the first real estate token securities were launched in 2020, a year earlier than in Japan, a very early stage market has been formed in which token securities can only be launched in exceptional cases through a regulatory sandbox. Currently, the amount of real estate token securities issued in 2023 through domestic operators such as Casa Korea, Lucent Block, Funble, and Bbrick is only about 22.5 billion won.