Real estate has been a key asset for both households and investors. In the physical world, real estate provides us with shelter as well as a place to do business and have fun.
As our lives become more intertwined with the digital world, some investors are beginning to focus on real estate in virtual spaces like the Metaverse. Real estate sales in the Metaverse have exploded in recent years and are expected to top $500 million by 2021, according to a report by provider Metametry Solutions.
To be sure, the digital real estate market is tiny compared to the physical world. Zillow estimates that the total value of the U.S. housing market will exceed $43 trillion by 2021, and the U.S. Department of Commerce announced that nearly $270 billion in new home sales occurred in June 2022 alone.
But still, real estate in the Metaverse has attracted the interest of some investors. Here’s what you need to know about the first place.
Facts about virtual real estate
• According to Metametric Solutions, real estate sales across major Metaverse platforms will reach $501 million by 2021.
• By January 2022, sales on those platforms were over $85 million and Metametric projects sales to reach $1 billion by 2022.
• In November 2021, Metaverse real estate developer Republic Realm said it paid $4.3 million for land in the virtual world Sandbox.
• Also in 2021, an investor bought a property in Sandbox next door to rapper Snoop Dogg’s digital home for $450,000.
• Social media giant Facebook has announced that it will change its name to Meta in October 2021, reflecting its focus on Metaverse and increasing sales of virtual real estate.
• Virtual real estate sales on major platforms failed to reach $1 million in the first week of August 2022 after adding $60 million in the week of November 2021, WeMeta reported.
• The weekly average sale price of virtual land in Centralland was $37,239 at the end of November 2021, but fell to $10,600 in August 2022.
• Sandbox’s weekly average sales price rose above $35,000 in January 2022, but was $3,990 in early August 2022.
Why invest in virtual real estate?
Individual investors and some companies are attracted to virtual real estate investments because of its long-term potential. Metavas is still in its early stages, and these investors hope that real estate acquisitions will become profitable as it grows.
Some investors believe that digital real estate will be just as valuable as physical assets. They may provide rental income, or they may be limited resources of ever-increasing value.
But exactly how MetaVas will change is still very uncertain, and investing in virtual real estate should be considered speculative and risky. If you can’t afford to lose your entire investment, virtual real estate may not be the best option for you. In terms of virtual real estate, the best long-term investments tend to have more stable businesses and lower risk.
These are the top four platforms for digital real estate sales:
Sandbox is an Ethereum-based metaverse or virtual world where users can design, share and sell assets digitally. The platform aims to disrupt the traditional gaming market by giving users ownership of what they create in the virtual world.
In the year In November 2021, Metaverse real estate developer Republic Realm paid $4.3 million for the land in Sandbox. That same year, an investor bought a virtual plot of land next to Snoop Dogg’s digital mansion in Sandbox for $450,000.
Decentraland is a virtual reality platform that allows users to purchase land as non-fungible tokens (NFTs) using a cryptocurrency that uses the Ethereum blockchain.
Tokens.com says a Canadian investment firm has paid about $2.5 million for virtual land in the Decentraland fashion district in 2021.
Voxels is another metaverse built on the Ethereum blockchain, where users can purchase land to build and explore on virtual world roads and buildings. The average weekly sale price of land in Voxels reached more than $14,000 in early 2022, but fell below $700 in August 2022, WeMeta reported.
A dream place
Somnium Space is a virtual reality world built on the Ethereum blockchain and allows users to buy digital land, build houses and eat in restaurants. You can travel through the virtual world and visit places created by other Somnium Space users. The world can be accessed through mobile devices as well as desktop PCs or virtual reality headsets.
How to invest in virtual real estate
Buying and selling virtual real estate is very easy once you decide you want to make a purchase. You can browse different forums from your computer and see which areas you’re interested in. You can find sales history and other important metrics on sites like NonFungible.com or WeMeta.
Once you’re ready to make a purchase, you’ll need to set up a digital wallet to hold your assets, such as cryptocurrencies or NFTs. Make sure your wallet is compatible with the Metaverse platform you’re buying from.
You also need to hold enough cryptocurrency to make purchases and depending on the platform you need to hold a certain amount of coin, for example MANA for purchases on Decentraland. Once those steps are completed, you are ready to make your purchase and once the sale is complete, you will receive an NFT representing your property.
The boom and bust in virtual real estate
Virtual real estate is still a relatively new phenomenon, but it has experienced some periods of rapid growth in its early existence.
In the year By the end of 2021, Facebook has announced that it will change its corporate name to Meta, indicating that it is focusing more on Metavas. The move gave some credence to the measure’s proposal, helping spur a boom in virtual real estate. It didn’t hurt that many cryptocurrencies hit all-time highs in November 2021.
But since then, sales have declined significantly. After increasing $60 million per week in November 2021 in the first week of August 2022, sales of virtual assets on major platforms failed to reach $1 million, WeMeta reported.
The average selling price has also decreased significantly. The weekly average sale price of virtual land in Decentraland increased to $37,239 in early November 2021, but fell to $10,600 in August 2022. Sandbox’s weekly average sales price rose above $35,000 in January 2022, but was $3,990 in early August.
Is virtual real estate profitable?
Whether investing in digital real estate is profitable remains to be seen. At this time, buying virtual land is a very speculative and risky investment. Your profitability will depend on other investors owning meta virtual and virtual land.
Investors who bought into Facebook’s hype have, in some cases, regretted their decision as prices have dropped more than 80 percent.
However, virtual real estate may be a more valuable investment option in the future. If the metaverse continues to grow and people spend more of their time and money in virtual worlds, owning digital land could be a lucrative asset. But that day has not yet come.
Companies that are involved in the sale of products in the Metaverse or that can receive a discount from others spending in the Metaverse can be profitable investments. Finding a way to invest in the Metaverse movement can be more profitable than an investment in the Metaverse itself.
Advantages and disadvantages of investing in virtual real estate
|The early stages of Metavas leave room for growth||Fortune may be temporarily tied to fluctuating cryptocurrency prices.|
|A new way to participate in the virtual economy||Very speculative and dangerous|
|Metaverse could become a profitable rental opportunity if developed further.||The investment may follow a boom and bust cycle.|
Investing in virtual real estate is just in its infancy and may hold benefits down the road. However, the success of the measure is not a given and investments in digital assets should be viewed with skepticism. If you are thinking of investing in digital land, you should be prepared to lose your entire investment.
New investors may consider investing in traditional assets such as stocks or bonds. Thanks to their low costs and diversification benefits, index funds can be a good choice for many investors. You can also invest in a customized portfolio based on your answers to a few questions through a robo-advisor.
Editorial Disclaimer: All investors are advised to conduct their own independent investment strategies before making any investment decision. Investors are also advised that past investment product performance is not a guarantee of future price performance.