Security tokens will boost multibillion dollar Asia-Pacific investment property sector, market players say

The multibillion dollar Asia-Pacific investment property market could be boosted by the use of security tokens, which could allow individual professional investors to take part in large-scale projects with entry tickets prices possibly as low as HK$1,000 (US$128.41).

These tokens – typically asset-backed digital representations of ownership or other economic rights in an underlying asset – will allow individual professional investors to take part in large-scale projects. They will also let developers and asset owners raise funds without fully disposing of their projects, according to market players.

“While we expect investment property transaction volumes across Asia-Pacific should rebound strongly in 2021, we expect the use of security tokens to rise rapidly and boost liquidity,” said Lau Chun-kong, the managing director of valuation and advisory services in Asia at real estate consultancy Colliers. The volume of such transactions amounted to US$184 billion last year, according to Real Capital Analytics.

Security tokens are tokenised digital securities created through security token offerings (STOs) and are traded using the blockchain distributed ledger technology. For issuers, STOs provide an alternative fundraising channel that offers greater efficiency, lower costs and a broader base of potential investors, according to the first edition of a real estate STO white paper series jointly published by accounting firm Deloitte, digital asset exchange HKbitEX, Colliers and law firm Sidley Austin.

For investors, STOs offer access to a new world of previously inaccessible investment opportunities by offering fractionalised interest, secondary market liquidity and information transparency.

Currently, less than 1 per cent of transactions in Asia are leveraging STOs, according to HKbitEX. There have been no use cases in Hong Kong yet.