Empirical evidence on the ownership and liquidity of real estate tokens

Abstract

To better understand the potential and limitations of the tokenization of real asset markets, empirical studies need to examine this radically new organization of financial markets. In our study, we examine the financial and economic consequences of tokenizing 58 residential rental properties in the US, particularly those in Detroit. Tokenization aims at fragmented ownership. We found that the residential properties examined have 254 owners on average. Investors with a greater than USD 5,000 investment in real estate tokens, diversify their real estate ownership across properties within and across the cities. Property ownership changes about once yearly, with more changes for properties on decentralized exchanges. We report that real estate token prices move according to the house price index; hence, investing in real estate tokens provides economic exposure to residential house prices.

Real Estate Security Token Offerings and the Secondary Market: Driven by Crypto Hype or Fundamentals?

“…For a suitable location variable, we rely on the dummy variable Detroit and the metric variable Distance DTWN to account for location quality since these variables are easily accessible and straightforward to understand for a retail investor. Similar to Swinkels (2023), we assume that rental properties outside of Detroit are more attractive for investors for diversification reasons, as the majority are located in Detroit. In addition, we also measure the distance to downtown in miles with the variable Distance DTWN to incorporate the micro-effects of the location.…”

“…Markheim and Berentsen (2021) present descriptive data based on a small sample of real estate tokens, where they point, despite the many theoretical advantages of tokens, towards challenges, such as regulatory uncertainties and relatively long transaction times. Swinkels (2023) examines the liquidity and ownership of real estate tokens using the same data source as our study, albeit with an earlier end date, and considers 58 tokens. His findings suggest that a tokenized property has, in the mean, 254 owners, with ownership changes occurring annually on average.…”

OTDF platform: A new paradigm of homeownership for life with mobility and liquidity

“…Real estate investment platforms are driving the fragmentation of housing ownership. 32 Examples such as Roofstack 33 and RealT 34 utilize blockchain technology to divide property ownership into fractional shares, representing the ownership as digital tokens. Investors can purchase these tokens and earn returns.…”

Tokenization of rental real estate assets using blockchain technology

“…The paper "Empirical evidence on the ownership and liquidity of real estate tokens" [29] utilized a dataset of 58 residential rental properties located in the United States, primarily in Detroit. The data was collected over a relatively short duration, spanning from August 2019 to February 2021.…”