Recent years have seen the boom, bust and boom again of alternative currencies, which can be lucrative for investors but also famously volatile and unpredictable.
But are cryptocurrencies – the best known of which is Bitcoin – a legitimate means by which to purchase a property in the UK?
Here we take a closer look and explore what the future could be for property and cryptocurrency.
Can you use digital coins to buy a home?
Some 12 years after bitcoin was first launched, recent commentary suggests that investors are still finding it very difficult to use their digital money to purchase a house.
It can be hard to document bitcoin in the same way as a traditional pound sterling deposit, and mortgage lenders are told to report any deposit that appears too odd or large – something that crypto investments can fall foul of, leading to the need for further verification.
Buyers may find that lenders and conveyancers are unwilling to accept cryptocurrencies when it comes to purchasing a house because of the extra risks and suspicion at play.
Daniel Browne, a senior associate at London-based law firm Kingsley Napley, told the Financial Times recently that there is currently very low appetite for sellers to accept cryptocurrencies throughout the UK. As a result, if people want to use their crypto investments towards a house purchase, it will typically mean converting the cryptocurrency into government-issued currency like sterling.
Much of the reluctance to accept cryptocurrency comes from its well-publicised association with criminal activity, in particular money laundering.
In a recent advice column on whether cryptocurrencies could be used for house purchases, the FT said that, although most lenders are unwilling to lend money where some or all of the deposit is made from the proceeds of crypto, there are some big high street names who are now prepared to do so. This includes Nationwide, the UK’s biggest building society, as well as Halifax and Barclays. Buyers seeking to use crypto are recommended to search for a crypto-friendly lender as early in the house buying process as possible, as they may be more difficult to come by.
Even once this stage has been traversed, however, and you’ve found a lender willing to accept the likes of Bitcoin or Ethereum, buyers are likely to find it very difficult to secure a conveyancer willing to accept crypto.
That’s because conveyancers are required, under strict money laundering regulations, to implement measures to identify who their client is and verify that the funds they receive from a client are not proceeds of crime.
“This means that the provenance of the crypto assets must be understood, including the way they have been traded and with whom,” the FT advice article said. “This typically involves the instruction of an expert who is able to carry out a full audit on the crypto proceeds being used. That audit can then form the basis on which the conveyancer can make a judgment as to whether it is safe to proceed with the proposed transaction.”
There are firms out there who do, but they will be very hard to come by and very much in the minority. Before you commit to attempting to buy a house using crypto funds, you should first make sure you have a lender and conveyancer willing to accept this form of payment.
Has it been done?
There are isolated examples of homes being bought through cryptocurrency in the UK, but they are still very much the exception rather than rule. Buying homes via Bitcoin certainly hasn’t gone mainstream, as some might have expected by now.
In the rental sector, co-living brand The Collective started accepting deposits and rent in Bitcoin as far back as 2017, but it’s not 100% clear if this is still the case and it hasn’t really spread far and wide to other providers in the lettings sector.
Meanwhile, in the sales market, purchases made via cryptocurrency have been extremely rare – and unique stories as a result of that.
Back in December 2017, property developer Go Homes became the first to sell homes in the UK using Bitcoin, while the odd agency here and there has said they will accept Bitcoin to act as a USP. There have also been a number of luxury properties with have gone up for sale only accepting offers in Bitcoin.
On the whole, though, it remains highly niche, with worries over money laundering putting many agents, conveyancers and lenders off, not to mention the amount of due diligence and verification that is required in comparison to a normal house sale.
What about the future?
Some believe, with millenials more likely to invest in Bitcoin rather than traditional stocks and shares or placing their money in the savings accounts of high street banks, that mortgage lenders will simply have to start accepting crypto more readily to meet increased demand.
Research published by Charles Schwab UK earlier this year found that over half of young UK investors are now trading cryptocurrencies, while a further 70% view it as a ‘good investment’. However, there has been a push back against the rise in crypto investing, with the Financial Conduct Authority spending considerable sums on a campaign warning of the dangers of investing in cryptocurrencies.
Crypto companies can be notoriously difficult to regulate, with often a reluctance to work with regulators, which in turn makes the market potentially more vulnerable to nefarious operators. There have been a number of high-profile cryptocurrency scams which have played on the fact that many see it as a quick, easy and lucrative way to make lots of money.
Chris Sykes, associate director and mortgage consultant at Private Finance, told FT Adviser that he doubts UK lenders will accept bitcoin any time soon.
“From looking at US clients' bank statements, often US mortgages work very differently to UK ones. Where UK mortgages are paid 99/100 by direct debit to the lender, in the US it seems that applicants physically send the money to their mortgage lender on a monthly basis,” he said.
As mentioned above, only a few lenders in the UK allow people to use crypto as a source of deposit, and even fewer allow it for the mortgage repayments themselves. Until this changes, and crypto becomes stable, trusted and mainstream – in the same way that banks are largely viewed, despite their own issues – then it will remain very difficult to buy a home using crypto in the UK. Especially given the fact that most conveyancers are reluctant to accept it and there aren’t many developers or agents happy to consider the digital asset, either.
If you’re a buyer looking to fund your purchase with crypto, you may strike it lucky and find a lender and conveyancer willing to help you, but this is likely to require a whole heap of research and is certainly something that is far from guaranteed.
For now, the traditional way of buying with pound sterling is king, but if cryptocurrency continues to grow at the rate it has over the last decade or so, this could start to change – with the buyers and sellers of tomorrow potentially being more comfortable in a world of digital coins.