LPI report finds Cryptocurrency could become the ‘new gold’ for affluent buyers

 The well-documented rise of Cryptocurrency has caught the eye of affluent and wealthy investors.  

The latest report from Luxury Portfolio International (LPI) entitled Finances of the Luxury Home Buyer has found cryptocurrency is becoming increasingly popular commodity for affluent global households, now just three points behind gold in a survey of over 3,000 respondents. 57% of Luxury Home Buyers (and the affluent overall) questioned believe now is a good time to invest in a safety net – with 41% citing gold and 38% cryptocurrency as their preference. In fact, the probability that the two are considered ‘Buys’ in tandem outstrips gold alone (78% vs. 41% likelihood of a buy sentiment).  

This flurry of positive ‘Buy’ opinion around cryptocurrency stems mainly from the United States and the United Kingdom. Conversely, the affluent in China are significantly more likely to have a ‘Hold’ sentiment with slowing demand over the past year in response to government signals against decentralized cryptocurrencies.

The Bitcoin price run started toward the end of the survey field period, suggesting the possibility that Luxury Home Buyers (in the market for a residence worth USD $1 million or more) were buying Bitcoin as the price soared from sub-$30,000 to more than $63,000 per coin by May 2021. Earning over 200% on an investment in a scant six months almost certainly inflated the net worth of today’s buyer.  

Central Bank Digital Currency (CBDC) is a real currency like an electronic bank note and issued by a central bank. Bitcoin is only recognised as a currency in El Salvador. For most users it is essentially a speculation vehicle that can be used for payments in some circumstances. It is not backed by anyone or anything. For some people this is the attraction. Many now define Bitcoin as a cryptoasset, due to it hardly being used for transactions but more for accumulation of value over a period of time – similar to gold.

Mickey Alam Khan, president of LPI commented: “Not long ago, the idea of a Central Bank Digital Currency (CBDC) was a rather obscure notion that garnered little attention. As cryptocurrencies began to rise in prominence, some pioneering central bankers began to wonder what the world would look like if traditional banknotes were to become digitised too.  The digital currencies powering the financial system of the future will come in a variety of different versions. Some will, of course, be issued by central banks (what we currently call CBDC), but others may be issued by the private sector and backed by central bank liabilities. In fact, these two examples mirror the current system of central bank money (banknotes) and commercial bank money (deposits).”

Today most central banks are exploring central bank digital currencies, and their work continues apace amid the Covid-19 pandemic. A testament to these motives is the launch of a first “live” CBDC in the Bahamas. We understand that this Bahamian front-runner is likely to be joined by others: central banks collectively representing a fifth of the world’s population are likely to issue a general purpose CBDC in the next three years. Many other major economies such as Canada, China and even Singapore are currently testing their own CBDC’s in anticipation of a future rollout.

The Covid situation has caused a switch from cash transactions using banknotes to electronic ones (which are digital already). This process has been going on for a while, but the pandemic has accelerated it. CBDCs also raise a unique opportunity to fight crime, money laundering and tax evasion, all areas of importance within the real estate sector. Unlike contemporary fiat currency, each individual tax credit can be tracked. It’s as if the serial numbers that already exist on paper money were being recorded in transactions, meaning one could examine the entire history of the banknote you received in exchange.

Mickey Alam Khan added: “Blockchain and smart currency are still in their infancy in the real estate universe. There are some cases of developers and vendors accepting crypto currencies for payment, but this is niche, due to the emerging anti money laundering and “Know Your Customer” (KYC) requirements being expanded to cover the crypto space. Forward-looking tech-savvy economies such as Dubai are leading the charge here and may indeed help establish standards in the future. There may be instances of a handful of real estate brokers and developers working with such new technology, but it is a long way from becoming the norm in real estate acquisition.”

The new report also found Luxury Home Buyers are prepared to out-bid other buyers for fine property and residences, thanks in large part to enormous cash reserves and record returns on investment over the past 18 months.  As a group, they are extremely confident in their financial situation despite the uncertainty surrounding new strains of the COVID-19 coronavirus, threatening lockdowns once again.

The study showed the affluent and wealthy class continues unabated to grow in both size and spending power. Ultra-high-net-worth individuals ($50 million or more in net worth) have increased in number by 73% since 2015 and are conservatively estimated to have consolidated another $4.5 trillion in assets to the class. With new market participants entering every year, the focus for brands and agents is building awareness and communicating a meaningful brand position.

Today’s luxury homeowners (primary residence has estimated value of USD $1 million or more) are the most likely Luxury Home Buyers of tomorrow (94% probability that a Luxury Home Buyer is currently a Luxury Homeowner). With this knowledge brands and agents can target their marketing efforts toward existing homeowners as the priority over purely net-worth-based targeting. Luxury Home Buyers’ median-net-worth is estimated at USD $4.5 million.

You can read the full report here: https://www.luxuryportfolio.com/reports

About Luxury Portfolio International

Luxury Portfolio International (LPI) is the leading network of the world’s premier luxury real estate brokerages and their top agents, offering unparalleled marketing and intelligence services across the globe. It is the luxury arm of Leading Real Estate Companies of the World® the global network of top independent real estate firms, with 550 companies and 135,000 sales associates in over 70 countries. Last year, network members participated in over 1.1 million global transactions. LPI attracts a global audience of visitors from over 200 territories every month and markets more than 50,000 luxury homes annually.