Metaverse land rush: Virtual real estate is selling like hotcakes!
The virtual world appears to be evolving rapidly and knocking on new investment doors. The frenzy is such that even traditionally conservative sectors like real estate are buying into the metaverse. Although not quite mainstream, virtual real estate is receiving massive investments from major companies and individuals.
According to multiple companies(1), the metaverse market valuation might reach $800 billion in 2024, up from around $500 billion in 2020. The number of property deals in the metaverse has been making headlines every other week. For example, Republic Realm, one of the most active investors and developers in the metaverse real estate market, recently paid a record $4.3 million for land acquired via The Sandbox platform.
Another notable deal occurred in November 2021, when Canadian decentralized finance (DeFi) company Tokens.com spent $2.4 million(2) for a property on the virtual world platform, Decentraland. Even celebrity Paris Hilton has entered the fray, recently unveiling Paris World, an online virtual world island where visitors can explore digital replicas of her Beverly Hills home and travel around the island for a small fee. Such developments demonstrate a growing hunger for assets in the metaverse, or the online ecosystem of interconnected digital worlds, where individuals can interact, work and shop in avatar form.
Pros and cons of buying a metaverse property
Any person can purchase a digital asset, but they must first register on one of the metaverse platforms. The fiat money is then converted into the platform’s digital currency, which can be used to make the payments. Additionally, real estate can be acquired, rented, or even sold in the digital domain, and ownership is verified and stored as a non-fungible token (NFT).
To put it another way, buying real estate on these platforms is like purchasing property in any city. Your purchased plot of land could increase in value as demand for the area rises. The property can then be sold in exchange for cryptocurrencies. You might also rent out space on your property to brands who may want to promote or build a shop or sell digital collectables to customers.
However, unlike real estate investments in the physical world, the metaverse’s digital land or property will vanish if the site on which it was purchased ceases to exist. As a result, it’s difficult to predict which metaverse platforms will flourish and which will fail. If your pick of platform gains traction, you could make a lot of money.
Also, anyone interested in purchasing metaverse real estate should bear in mind that this is a small market and has no legal framework to safeguard your investment. It’s relatively a new asset class, so the opportunities and challenges are still revealing themselves. Therefore, it is prudent to do your homework before investing.
On the other hand, if predictions are anything to go by, the demand for metaverse real estate is expected to increase. Every day, more people and businesses are becoming interested in virtual real estate and examining what is feasible for them and their budgets. When they make purchases in this universe, they often inform others and perpetuate their cause, because, in the metaverse, the more the merrier.
Also, when people invest in neighbourhoods, they attract more people with similar interests and goals, and the area increases in value and desirability. Unlike the real world, there are fewer worries in the metaverse when it comes to crime and theft, but it is still possible for a neighbourhood to deteriorate due to apathy.
Furthermore, many people cannot afford to purchase physical real estate due to entry barriers. This is where virtual real estate makes a clinching case for itself, by being open to investors of all financial capabilities. And so far, it has managed to defy the odds. As far as its future is concerned, only time will tell.