Global property consultancy Knight Frank has turned its attention to the rise of cryptocurrency, NFTs, and the metaverse, with the group joining forces with Finder founder and crypto investor Fred Schebesta to decode some of the Australian trends emerging and how they impact real estate.
In conjunction with the release of The Wealth Report 2022, Knight Frank and Mr Schebesta took a deep dive into the future integration of cryptocurrency and property.
They noted many ultra-high-net-worth individuals were already balancing their portfolios with virtual as well as physical assets.
That trend is expected to continue with the metaverse, cryptocurrency, and non-fungible tokens (NFTs) tipped to increasingly influence how individuals build wealth.
The rise of cryptocurrency and NFTs
In Australia, recent Finder research indicates more than 17 per cent of Australians own cryptocurrency.
Knight Frank research found this percentage of ownership was significantly higher in ultra-high-net-worth individuals, with 27 per cent owning some type of crypto and 16 per cent owning an NFT.
“The popularity of NFTs amongst the ultra-wealthy is hardly surprising given investing in art collections has always been one of the most expensive hobbies across the world for the rich and famous,” Knight Frank explained.
They also noted this trend is continuing to soar with the Knight Frank Luxury Investment Index recording 71 per cent price growth in art over the past decade, partly driven by a strong surge in younger wealthy players.
Meanwhile, their research also found the ultra-wealthy are transitioning towards digital tokens, with some already paying their mortgages in cryptocurrency.
Mr Schebesta predicted there would be a significant shift in demand for crypto and NFTs going forward, with more and more interesting applications of the currency from which investors can earn yield.
“The environment we are in is of stock markets falling, interest rates rising and increased pressure to look for a hedge against inflation,” Mr Schebesta said.
“This is focusing attention on yield. Crypto can absolutely deliver that, and we are going to see some new development and innovations in this arena.
“I think we will see a new trend of transitioning into crypto investments as there is a search for fresh investments during the ‘down cycle’ or ‘flat period’.”
But not everyone is comfortable with crypto… yet
While the popularity of crypto and NFTs might be rising, Knight Frank noted not everyone is comfortable with investing in the new digital world.
Their research indicated the biggest barriers preventing more ultra-wealthy from investing in cryptocurrency was lack of understanding about their utility (cited by 61 per cent of survey respondents), and the perception the market is too volatile (47 per cent).
In the Wealth Report, author Flora Harley explained that to focus too specifically on the unpredictable worlds of cryptocurrencies and NFTs risked missing the more substantive potential emerging opportunities offered by the digital revolution, such as decentralised finance and Web3 (a decentralised version of the worldwide web based around blockchains).
Meanwhile, Knight Frank’s Attitudes Survey, found 61 per cent of the wealth managers they interviewed now see blockchain technology as an increasing opportunity for their clients.
The mega opportunity of the metaverse
The report went on to note the megaverse had now “undeniably” been unleashed and is touted as a multi-trillion dollar investment opportunity.
“This presents significant retail opportunities at the confluence of physical and digital real estate,” Knight Frank said.
And according to Mr Schebesta, it’s this concept of digital land which offers the biggest jump for real estate.
“It’s obvious and already happening,” he said.
“The other area is NFTs and property titles.
“The system isn’t broken and needing to be fixed, it works but there is potential to improve, and we should transition away from pieces of paper and towards digital tokens.
“Paying for mortgages in crypto is already happening.”