Key Points
The dream of owning property is becoming more of a challenge for the average income earner, especially in Europe. Wealthy investors are buying multiple properties, causing a surge in housing prices, and making property ownership a luxury only the wealthy can afford.
This problem has grown so severe that it is causing a democratic backlash in major European countries. For example, Spain’s Prime Minister Pedro Sanchez has proposed a 100 percent tax on any non-EU citizen buying a home in Spain. This comes from the frustration over the monopoly foreign investors have on the Spanish property market.
Spain’s Housing Crisis
Spain, in particular, is facing a unique scale of housing access inequality. The Prime Minister has indicated that social housing only makes up 2.5 percent of Spain’s market. This is significantly lower than other major EU nations, such as 14 percent in France and 34 percent in the Netherlands.
The Spanish coalition government is planning to accelerate the construction of new homes. The Bank of Spain has stated that 600,000 new homes are needed by the end of 2025. However, only 90,000 units are being built annually. This context is crucial when considering that people from outside the EU, including post-Brexit UK, are buying 27,000 houses a year in Spain.
The proposal to introduce the 100 percent tax has understandably caused concern among many non-EU investors. They feel the Spanish government is unfairly targeting them. Industry insiders have warned that the property levy could discourage investment in the country without addressing the root problem of decreasing housing affordability and supply.
Investing in new digital tools that democratize property investment could be a potential long-term solution to the European property affordability crisis. One of these new tools is tokenization, which turns a real-world asset, like real estate, into digital tokens. These tokens can be tracked, transferred, or traded on a blockchain. Each token represents a fraction of ownership in the asset, making it easy to divide, store, and exchange digitally.
The tokenization of real estate could provide a new approach to addressing Europe’s property ownership crisis. It could help tackle housing shortages and enable broader access to property ownership. Using blockchain technology, a property can be converted into digital tokens representing a fraction of legal ownership. This allows all investors, regardless of their portfolio size, to gain exposure to real estate.
Tokenization also opens properties to a global pool of investors. Since the property has been divided into multiple tokens, investors can buy or sell tokenized property on an exchange that is accessible to global players. This removes many of the difficulties international investors might face in buying local assets.
Tokenization provides a streamlined pathway for all investors to have a chance to own property, even if only pieces of it. Since tokenization platforms are built on blockchain ledgers, all tokenized real-world assets are managed by smart contracts. Each transaction or ownership transfer is recorded and cannot be altered, reducing the risk of fraud or corruption.
European countries seeking to support more local citizens to invest in property must remove barriers that make it difficult for smaller investors to compete with more established global buyers. Rather than taxing wealthy overseas investors, European governments and real estate agents can embrace blockchain technology by tokenizing parts of a property on the market. By doing this, every investor now, both at home and abroad, has the chance to benefit from appreciation in their property markets.
