With Bitcoin growing in popularity, will we be buying property with cryptocurrency in the UK in the future?
Growing numbers of people – especially young people – are using cryptocurrency such as Bitcoin, Litecoin, and Etherium to buy services and products such as cars – Tesla will accept Bitcoin.
But the prospect of buying a house with Bitcoin looks far off, currently.
That’s because cryptocurrency – or crypto – doesn’t actually exist and even when you sell Bitcoin to buy real currency (this is referred to as ‘fiat’) you may struggle to produce a paper trail as to where your money for purchasing a house has come from.
Indeed, you may find that some lenders may even get in touch with the police to confirm that the money has come from where you say it has.
What is cryptocurrency?
The first issue is to understand what cryptocurrency is.
This is a type of digital currency that doesn’t belong to a bank or a government.
Bitcoin is perhaps the most famous and you can send money quickly and anonymously – usually without paying fees.
However, the downside to Bitcoin is that it is a very volatile currency which creates its own issue.
For example, you would need your transaction to be completed very quickly if buying a house using cryptocurrency to ensure that you could afford it should the currency fall dramatically in value.
Essentially, you need a conveyancing process to be sped up for both the seller and buyer so that the completion and exchange happen simultaneously – because the seller may end up out-of-pocket should the currency fall.
Here are some facts about bitcoin:
- There are only 21 million Bitcoins in circulation;
- When created in 2009, they were worth virtually nothing;
- You will need only SEVEN bitcoins to buy the average priced house in the UK (at least, when we wrote this article you did!);
- The volatility of Bitcoin saw investors lose 64% of its value over two weeks in December 2017;
- In 2017, the Land Registry confirmed it will record house sales completed in Bitcoin.
Also, while the transactions are anonymous, every purchase or transfer of Bitcoin is logged digitally.
Now that you know what is cryptocurrency, do you think buying property with cryptocurrency in the UK is a viable option? Let’s keep digging.
Do estate agents and lenders accept Bitcoin?
While most people have heard of Bitcoin and cryptocurrency, you may struggle to find an estate agent willing to accept digital money.
However, two new-build homes were bought using Bitcoin in December 2017 in Essex.
And since then, there have been several other homes that have been listed for sale only in Bitcoin. Though no-one appears to know whether they were eventually sold for crypto.
The big issue is over money laundering so you may find that conveyancing lawyers, as well as estate agents, will be reluctant to use Bitcoin though growing numbers of legal firms are aware that clients will increasingly be wanting to pay them with cryptocurrency.
Among the estate agents willing to accept cryptocurrency is Essex-based PropertyVine, while online letting agent Mashroom says it will accept digital currency as a rent payment.
Mashroom’s chief executive, Stepan Dobrovolskiy, said that with 19% of England’s homes being occupied by private renters means that for increasing numbers of tenants, cryptocurrency is their payment method of choice.
He added: “We have to move with the times and accepting crypto payments is the next step for business.”
Anton Frost, the head of Cambridge residential at real estate firm Carter Jonas, told one national newspaper that many people have heard of cryptocurrencies and Bitcoin, but this was more as a ‘concept than a payment option’.
He said that crypto isn’t conventional but the fact that it is being considered by growing numbers of firms ‘indicates a direction of travel’ that over the next 10 years, crypto will become mainstream.
Mr. Frost also highlights that some organisations are using crypto, ‘It is not widespread in the estate agency world’.
Can I use crypto to get a mortgage?
This is an issue highlighted by an article in the Financial Times that shows that most lenders say they will not lend where the house purchase deposit is made from crypto which makes the process of buying property with cryptocurrency in the UK much more difficult.
However, this is changing and there are some well-known lenders who are prepared to accept crypto deposits including the UK’s biggest building society, Nationwide, plus Barclays and Halifax.
Nationwide says requests to use crypto are on a ‘case-by-case basis’.
If you want to use crypto to buy a house, financial experts recommend that you:
- Start early in the process to find a crypto-friendly lender;
- Find a conveyancer who is willing to be paid in crypto.
However, this last point could be a stumbling block because conveyancers must comply with money laundering regulations and must identify their clients and then verify that any money they receive is not from criminal proceeds.
To get around this you need to:
- Produce a paper trail of your crypto ownership;
- Hire an expert to carry out an audit to convince the conveyancer to go ahead.
This is a time-consuming effort to use crypto to buy a home, but it might change if growing numbers of buyers and sellers decide they want to deal in a crypto-only transaction.
Can you buy a house with cryptocurrency?
In theory, buying property with cryptocurrency in the UK or any other service or product is possible and a growing numbers of firms are accepting it.
Along with Tesla, the likes of PlayStation and Microsoft will also accept crypto payments.
One digital consultant told Yahoo Finance that she feels that it’s a ‘long way off’ before cryptocurrency becomes normal to buy a house, or for meeting mortgage payments.
And for mortgage lenders, and the bondholders who underpin the mortgage market, it’s the fluctuation in the value of cryptocurrencies and the lack of regulation that’s an issue for them.
Get advice from a legal professional:
Buying a house with Bitcoin
There are two issues when you want to buy a house with Bitcoin:
- The house seller is not willing to accept Bitcoin
If so, you will need a third-party or website to sell or exchange your Bitcoin for cash.
- The house seller is willing to accept Bitcoin
You will need to agree on the property’s final price and then work out how to pay the fees for those firms in the transaction who are unwilling to accept crypto.
However, finding a third party may prove difficult since most UK banks have announced already that they will not accept transactions with Bitcoin – or any other crypto.
That’s because they are unregulated, and the transactions are not easy to trace.
There’s also the issue that cryptocurrencies are being used for money laundering purposes which will make it almost impossible to obtain a mortgage.
Why buy a house with bitcoin
There are some advantages when it comes to buying a house with Bitcoin:
- Using bitcoin to buy a house will cut out the middleman and speed up the process;
- The buyer can remain anonymous when using Bitcoin – a popular reason among Bitcoin buyers;
- You will pay lower fees using Bitcoin when compared with using a debit or credit card;
- A seller willing to accept Bitcoin may be more willing to offer a discount for those paying with cryptocurrency.
There’s no doubt too that if you find a seller willing to accept crypto as a payment, then you will increase your chances of securing that property.
The disadvantages of buying property with cryptocurrency in the UK include:
- The Bitcoin valuation fluctuates every day – this makes it difficult to agree on a house sale price;
- There aren’t that many Bitcoin miners or investors so there are relatively few people who will have enough in cryptocurrency to buy a house;
- A crypto transaction for buying a house may struggle to find estate agents and insurance companies to take Bitcoin – and you’ll have to pay stamp duty;
- There’s no regulatory protection scheme in the UK for Bitcoin which means that if its value falls, there’s no compensation.
Again, a major disadvantage is that since Bitcoin is an anonymous currency, you’ll find that lots of professional organisations will be unwilling to deal with you.
Buying property with cryptocurrency in the UK
As this article explains, there are just a few UK lenders who will allow people to make deposits using cryptocurrency.
So, until crypto becomes more mainstream and trusted, and also more stable, then it will remain difficult for someone to buy a home in the UK using crypto.
The biggest stumbling block will be that conveyancers will be reluctant to accept this currency because of money laundering regulations, and there are not many estate agents or property developers wanting to consider crypto as legitimate finance.
However, you may strike lucky if you want to buy a house in the UK with crypto and find a conveyancer and a mortgage lender to help.
But to do so you’ll need to carry out lots of research and until the likes of Bitcoin do become mainstream and lose their volatility, you’ll find that you will need to convert your cryptocurrency into pounds Sterling to buy a home.
Having said that, cryptocurrencies have grown quickly in popularity which means this issue could change in the future with growing numbers of home sellers and buyers in the UK being comfortable using digital currencies for their homebuying transactions.