Aeons ago, human tribes lived a nomadic existence, always staying close to where food sources were abundant, and moving on once depleted. This on-the-move life prevented the formation of lasting settlements.
Over the course of centuries, as humans evolved, they transitioned from a hunter-gatherer way of life into a more settled lifestyle. The development of agricultural techniques meant that farming yields could support a limited amount of people first, leading to the formation of tribes that took residence near fertile lands. But still, these tribes remained scattered and vulnerable. Other tribes might have their eye set on the same fertile fields, for example, leading to frequent raids and constant conflict.
For protection, tribal communities grew into hamlets. Hamlets into villages. Villages into towns, and towns into cities. And somewhere along the line, the concept of real estate came to be.
A brief history of real estate
Homeownership, as we understand it today, is a relatively recent development. During the 1800s in the United States, for example, most people would have had little chance to purchase a home as sellers would require a substantial lump sum, and banks would typically not lend to ‘average’ individuals. (Widespread mortgage approval wouldn’t become a reality in the States until the 1860s, with the passing of the National Bank Acts.) Still, by the last decade of the 19th century, less than 50% of people owned a home. (This percentage remained more or less constant throughout the next six decades or so.)
What really kickstarted the homeownership market was the Servicemen’s Readjustment Act of 1944, commonly known as the G.I. Bill. (G.I. was the term used to refer to veteran soldiers and airmen who fought in World War 2.) The Bill provided for substantial financial assistance for returning war veterans, including low-interest student loans, funds for new businesses, and low-cost mortgages, among many other benefits. (Recipients of the benefits paid no income tax on it, as the IRS did not consider the income as ‘earned.’)
Many veterans used the funds to open new businesses. Others used the money for education.
And a large percentage of them purchased homes.
Homeownership rates in the States soared following the passing of the G.I. Bill. And along with it, the United States began acquainted with the concept of suburbs. Thousands of single-family homes began appearing everywhere around the outskirts of big cities, establishing whole new neighborhoods. (The first suburban community is generally agreed to be Levittown, built by real estate developer William Levitt in Long Island, New York, in 1946. Most developers would subsequently use Levittown as a template of sorts to build suburban areas all across America.) The meteoric rise of the suburbs contributed in no small part to the economic boom of the 1940s and 1950s in America. Homeownership rose from around 44% in 1940 to just over 60% just two decades later. Later studies revealed that the suburban population in the States nearly doubled to 74m between 1950 and 1970.
The financial windfall rising from real estate construction cascaded down to many other industries. Tradesmen, car manufacturers, appliance makers, all benefited from the G.I. Bill. America was awash with money during this era, and historians agree that mass consumerism was born around this time.
As suburbanization spread across the continent, the amount of real estate brokers mushroomed. Buying and selling property suddenly became a game of high stakes. People made fortunes selling property. The stereotypical figure of the property tycoon emerged from this era.
Dryden Dreams: Real estate, blockchain style
Last April, a real estate broker by the name of Shane Dulgeroff became an overnight celebrity when he attempted to sell a non-fungible token (NFT) alongside an actual house through OpenSea, a well-known NFT marketplace. The NFT, known as Dryden Dreams, depicted a colourful, 60s-style piece of video art created by digital artist Kii Arens. Dulgeroff set a minimum bid of 48 ETH for the NFT. There were no bids for it, and the auction closed with an unsold NFT. (The house, located on 221 Dryden St, Thousand Oaks, California, did sell for $746,000.)
Dulgeroff’s escapade became notable for two reasons: one, for being the first time that a real estate broker used an NFT marketplace to sell a property. And two, Dryden Dreams remains, to date, the only NFT representing a real property on the market.
One could argue that Dulgeroff engaged in a publicity stunt, and there is a good argument to be made there. But be that as it may, it paid off. The property deeds changed hands. Dulgeroff did recognize that the real value of his foray into blockchain was not the sale of the house itself, but the use of a crypto platform to put a property on the market. According to him, that’s where the real value of the whole affair lies, and there’s also a good argument to be made about that.
Welcome to the metaverse: The future of virtual real estate NFTs
Real estate is a complex and heavily regulated business, with many tax and legal ramifications. Currently, there is no framework, legal or otherwise, to regulate how real properties could be sold as NFTS, or even if this could be done at all. This is completely uncharted territory.
But what about virtual properties?
Digital land banks are now emerging, where virtual real estate sellers hold tens of thousands of virtual plots. And these are selling well, too. A prominent metaverse project, Decentraland, has accrued over $55m in sales so far.
Decentraland fuses an age-old idea (the creation of alternative universes) with blockchain technology. Wily virtual real estate entrepreneurs have found a niche market where the imagination is literally the only limit. And along the way, they can sell land plots, estates, wearables, avatars, and all sorts of digital goods, all in NFT form, of course, using the Ethereum chain.
Real estate professionals thrive on tradition. You show the house, discuss a price, and sell the house. Or land, or farm, or whichever the property is. Real estate dynamics have changed relatively little over the last few decades. The industry has not necessarily benefitted from any significant technological advancement, there’s still plenty of old-fashioned paperwork and administrative work to be done.
It is unclear how, or if, real estate (in the real world sense) could implement NFTs. Tokenizing the property rights process could make the administration-heavy process much lighter, maybe, as rights could be checked, managed, and traded almost instantly on the chain. But this is still some way away.
The real impact of NFTs for real estate, right now, is in the metaverse environment. And while the land plots might be virtual, the profits are very real.