More Australian home buyers using cryptocurrencies to save for a deposit

A growing number of home buyers are investing in cryptocurrencies like Bitcoin as a way to get into the booming property market.

Mortgage brokers across Sydney and Melbourne say buyers have used online “coins” either for a deposit or to pay off a large portion of their mortgages altogether.

Cryptocurrencies, also known as digital coins, can be sent from user to user without a central bank or single administrator using blockchain technology. 

Though they have not been recognised as a mainstream currency in Australia, cryptos have grown in popularity and value in recent years, with one Bitcoin now worth just over $42,000. 

There are now more than 4000 cryptocurrencies in existence, with millions of investors, including Australian home buyers, wanting to cash in on the next digital coin boom.

However, mortgage brokers warn that using digital currency to buy property in Australia is not without its risks. 

Marvin Coleman Mortgage Choice Oakleigh in Melbourne said cryptocurrency markets were extremely volatile.

So much so, one tweet from the CEO of Tesla Motors and crypto investor Elon Musk, or a comment from former US President Donald Trump, can cause values to fall by double digits and strip thousands from people’s investments within minutes.

Adding to this, banks do not consider coins like Bitcoin, Dogecoin or Ethereum a valid form of Australian currency or savings, meaning it is not considered part of a home buyer’s overall finances.

“We’re obviously at a very embryonic stage of this,” Mr Coleman explained. “Around 5 per cent of my clients have crypto, so the obvious question is ‘can I use it to demonstrate I can complete my property purchase?’

“Banks don’t really have a position, and they expect people to have at least 3 to 5 per cent of the purchase price in their savings.”

Crypto trading platforms don’t provide enough proof of an investor’s holdings, meaning banks would not consider it a financial asset, Mr Coleman said.  

People had to consider cashing in, which meant choosing between selling up their cryptocurrency holdings or buying a home.

“There’s a lot of FOMO [Fear of Missing Out] in both the crypto and the property markets, and lots of people still want to ride the crypto wave,” Mr Coleman said. “But I think right now there’s slightly more nervousness around crypto and huge FOMO in the property market.”

He said clients had cashed in their crypto investments to either fund a deposit or even pay off a large amount from their overall mortgage.

Mortgage Broker Sydney owner Michael Brown agreed, saying more buyers, including well-established home buyers with holdings in cryptocurrencies, were seeking home loans. Some had investments as big as $300,000 in digital coins.

“I’ve had three clients with cryptocurrency over the past three months,” Mr Brown said. “It’s absolutely becoming more common.”

He expected to see far more people invest in both cryptocurrency and property in Australia.

“It really is for people looking for a greater return than those sitting around with money in a term deposit in the bank,” he said.  

Young buyers, especially first-home buyers, were early adopters of cryptocurrencies, said mortgage broker and 40Forty Finance director Will Unkles, who added there was a lot for them to consider.

“I do discuss with them the fact that their full deposit at settlement has to be present and accounted for,” Mr Unkles said. 

If money was kept in cryptocurrency trades and values fell, buyers could be caught without enough money to buy a home they had agreed to, he said.

While cryptocurrency wasn’t considered mainstream enough to use to purchase a home via a bank, that may change in the future, Mr Unkles said.

“Literally, three or four years ago, it was a similar thing with people buying and renting out via Airbnb. Now banks accept it. The mortgage world does take a while to catch up, but I wouldn’t rule it out altogether.”