Real Estate Before And After Bitcoin

This article attempts to predict what the transition to hyperbitcoinization will look like through the lens of the real estate market. Naturally there are elements of fun and fantasy to this exercise. Part 1 covers the transition. Part 2 will explore what the real estate market could look like on a Bitcoin standard.

The U.S. dollar has lost. Bitcoin is the new global money. Hyperbitcoinization has arrived. The world – and the real estate market – have changed forever. In a world now operating on a Bitcoin standard, those that create actual value are rewarded and the parasites that once fed off the money printer are scratching their heads as to how it all happened. The real estate market functions rationally again. Before we examine what the real estate market looks like under hyperbitcoinization we’ll recap what happened during the transition, starting in 2020 …

Part One: The Transition

As part of their COVID-19 pandemic response, many governments introduced moratoriums on evicting tenants from residential rental properties – after all, jobs had been lost and livelihoods destroyed by their lockdowns. Banks “did their part” by allowing holidays for mortgage repayments. For a while, the real estate market completely stopped transacting. The ability to travel, see, touch and feel real estate and the economic uncertainty created by the government’s response to the pandemic was a perfect storm. However, after the northern hemisphere summer and complete recovery of equity markets, the real estate sector followed suit and “got on with it” despite some of the practical transactional hurdles still remaining. Institutions and middle/upper-class households with secure jobs were equally flush with cash and began to put it to work in the second half of 2020. When mortgage repayment holidays started to wind down towards the end of the year a minority of stretched borrowers were forced sellers, but luckily sold into an incredibly strong market with prices ensuring they mostly sold at profit. Similarly, homeowners around the world confirmed their investing genius with yet another year of double-digit price growth despite everything that had taken place. In the commercial space, government intervention also ensured recalcitrant tenants could not be moved on easily, however the new money created flowed into the hands of institutional investors and ensured that capital values remained high despite poor income performance from retail, office and hotel assets in particular. Meanwhile, logistics valuations hit new records as e-commerce became entrenched globally and data center construction boomed to meet demand from big tech’s continued expansion and influence.

2021 was the year inflation started to be noticed and better understood by the general population. According to government statistics it reached levels not seen for 40 years, however distrust in these numbers grew and some outspoken voices started to question whether hyperinflation was already beginning throughout the western world. Towards the end of 2021 the Turkish lira began to collapse – the first major fiat currency domino had fallen. Throughout the year institutional investors had begun to accumulate single family homes across America, with groups such as BlackRock paying 50% premiums in many cases. In places such as Canada and Australia, governments began the socialization of private housing by announcing shared-equity schemes masked as ways to help first-time home buyers enter the market. Measures initially introduced as a short-term response to the pandemic were extended indefinitely. As the attractiveness of U.S. Treasury bonds waned further, the Chinese continued to be major buyers of high-end real estate and infrastructure globally, simultaneously pushing up prices and pushing out locals – extending a decade-long theme. Once again, prices rose in double-digit percentage terms across almost all real estate sectors.

At the end of 2021 the Federal Reserve Board was openly flirting with tapering asset purchases and raising interest rates during 2022 while admitting inflation was no longer “transitory,” sending jitters through the market as pricing and demand for real estate started to soften slightly. Lockdowns returned to Europe, travel restrictions escalated and pandemic fatigue took hold globally, bringing back some of the practical challenges faced in 2020. Focus began to increase on the conundrum faced by central banks – the impossible trade-off between trying to deal with rising inflation and bursting a debt bubble that would have tremendous economic and social consequences.

Throughout 2022 it was increasingly clear governments and central banks had no real intention of stopping inflation. Multiple double-digit prints in major western economies brought more rhetoric from bankers, but they only spoke about raising rates at an ever-distant point in the future. Capital markets responded by entering a euphoric risk-on mode, pushing equity markets to all-time highs. Bitcoin had an incredibly strong first quarter and although it gave up some gains during the middle of the year, went on to surprise most by resuming its consistent upward grind thereafter as it established itself as a macro asset of institutional and nation-state significance. El Salvador’s first “Bitcoin bond” was oversubscribed and their second triggered a number of South American and African nations to adopt similar legal tender policies and funding structures.

Moving into 2023, multiple high profile S&P 500 companies announced bitcoin strategies. This took much longer than the market initially anticipated after MicroStrategy’s pioneering moves in 2020. With bitcoin’s market capitalization now entrenched over $3 trillion and it’s resilience fully tested through another cycle, their entry had been further de-risked by Democratic party infighting preventing an anti-Bitcoin position becoming part of either party’s 2024 election platforms. As this was all unfolding, residential real estate prices had doubled since the start of 2020 and now half of all home sales in the U.S. went to an institution. Violent social unrest had started to consistently emerge throughout Europe and North America, but was mostly quelled by increasingly strict policing of now almost-permanent lockdowns. Rental controls became ubiquitous globally and tenants could not be evicted, but this had no impact on nominal real estate values given the combination of institutions being a dominant buyer and continued currency debasement. However, for those on a Bitcoin standard already, when priced in bitcoin real estate was on a continual decline.

Although governments were generally powerless in being unable to counter bitcoin’s ongoing growth, they had significantly more success debuting central bank digital currencies (CBDCs) built on the Ethereum blockchain. Paradoxically this caused more people to begin adopting a Bitcoin standard, increasingly frustrated by the never-ending lockdowns and expanding surveillance state. Throughout this period multiple major currencies began to fail against the U.S. dollar, with governments and central banks only response being to further debase the currency, leading to hyperinflation and more negative social consequences. After bitcoin’s U.S. dollar price surpassed $1 million, Canada and New Zealand became two of the highest profile examples of modern hyperinflation and incredible stories began to emerge from their real estate markets. In Canada, where the government had already extended their socialization of housing by acquiring residential real estate outright and providing housing free of charge to essential workers, the lucky few remaining middle to upper class big tech employees were able to retire existing mortgages with a single annual bonus. In New Zealand, university students from China purchased entire condominium complexes and wineries with the allowances from their loyal party member parents. In these examples, in local currency terms real estate prices continued to rise as people fled their currencies. This was of little consolation for locals though, as when priced in stronger currencies or bitcoin, real estate was crashing hard. Wage growth could not keep pace with inflation and when combined with decimated cash savings it became impossible for most people to buy a house. Transactions ground to a halt. Even equity-rich sellers chose not to cash in as the market moved too fast for them to be able to redeploy into a comparable replacement property.

Bitcoin’s adoption escalated further in the second half of the decade and its U.S. dollar price marched towards $10 million. Many on a Bitcoin standard chose to leave their fiat careers as life in a surveillance state policed through CBDC wallets failed to align with their values. Fiat cash flows were also no longer necessary as their bitcoin wealth had the potential to provide financial freedom. This was still possible in the few U.S. states and rouge nations that had broken free and either adopted a Bitcoin standard or allowed it to flourish unfettered, but getting there was impossible for most people as temporary government border controls in response to the pandemic became permanent features and convenient methods of preventing capital flight. Once the CBDC wallet’s social credit system was operational, various controls were introduced to combat inflation, pushing consumers to low-cost deflationary choices and taxing “unsociable” expenditure punitively. This extended to various aspects of home ownership, particularly accessing mortgages which became increasingly difficult for the majority of bitcoin owners who had a KYC footprint. Without fiat salaries and despite their (often hidden) bitcoin wealth, many traditional banks would only provide services and mortgages to Bitcoiners who held their satoshis in bank custody. Self-sovereign Bitcoiners rejected this requirement. Instead, they…