The metaverse is still relatively new. Investing in it entails big risks. But with an equally big potential for high returns, it may be worth the risks. However, like with all other investments and business ventures, you must do your due diligence before deciding to take risks.
Here, we give you a comprehensive guide to metaverse real estate. Learn what it really is, how it works, the risks and challenges you might face, and how you can make it a lucrative investment.
The Ultimate Guide to Metaverse Real Estate:
- What Is Metaverse Real Estate?
- Why Purchase Metaverse Real Estate?
- How Much Is Metaverse Real Estate Worth?
- How to Buy a Metaverse Property?
- Where to Buy Metaverse Real Estate?
- How to Choose Which Parcels of Land to Buy on the Metaverse?
- Statistics on Metaverse Real Estate
- Risks and Challenges of Investing in the Metaverse
- Big Risks with Potentially Big Rewards
What Is Metaverse Real Estate?
Metaverse real estate are parcels of land in virtual worlds. In the simplest sense, they are pixels. However, they are more than just digital images. They are programmable spaces in virtual reality platforms where people can socialize, play games, sell NFфTs, attend meetings, go to virtual concerts, and do countless other virtual activities.
With the rise of the metaverse, digital real estate is expected to grow and expand as well. In fact, there has been a metaverse real estate boom in the last quarter of 2021 after Facebook changed its name to META and indicated a focused interest in the metaverse. As its popularity continues to grow, the value of metaverse real estate is forecasted to have a CAGR of 31.2% from 2022 to 2028.
Why Purchase Metaverse Real Estate?
Metaverse real estate gives users a place to connect online with other people. Individuals can use their digitized land to play games and socialize. Creators can monetize the content of their property by charging for access or trading their NFTs. Brands can use their virtual properties to advertise services, organize virtual product launches, and provide unique customer experiences. For real estate investors, these parcels of digitized land offer a lucrative opportunity. Just like in real-life, metaverse properties can be developed and flipped or leased. Indeed, there are many possible use cases for metaverse real estate.
How Much Is Metaverse Real Estate Worth?
When Decentraland held its first LAND auction at the Terraform Event in December 2017, a parcel of land cost a mere $20. Those parcels sold for an average of over $6,000 in 2021. By the start of 2022, the prices have skyrocketed to approximately $15,000 per LAND token.
With the positive outlook on metaverse growth, companies have been heavily investing in virtual land properties. In October 2021, Tokens.com, a blockchain technology company, acquired 50% of virtual real estate company Metaverse Group for $1.7 million. In November, the Republic Realm broke records when it purchased a property in The Sandbox for a whopping price of $4.3 million.
The heightened interest in metaverse properties has caused prices to increase further. Digital land sells from $6,000 to $100,000, but some are reportedly being sold for even much higher. One of the biggest sales the past year is a property adjacent to Snoop Dogg’s in The Sandbox. An anonymous buyer purportedly bought it for $450,000.
How to Buy a Metaverse Property?
Purchasing a metaverse property works pretty much the same way as buying an NFT. Your deed of ownership is a unique piece of code on a blockchain. This code is what certifies your ownership or rights over that piece of digital land.
So to start your metaverse real estate portfolio, you’ll need to have your own digital crypto wallet. Some platforms use specific cryptocurrencies for their transactions, so you might want to check them out before signing up for a new wallet. Then, head to the virtual metaverse platform and sign up to create an account. You’ll need to link your digital wallet to the platform to buy land and other assets. Choose a parcel of land and purchase it.
Like real-world properties, you can also purchase metaverse land through brokers and property managers. Unlike in the real world though, metaverse brokers don’t need licenses and are under no regulations. So make sure you transact with reliable ones.
Where to Buy Metaverse Real Estate?
The majority of metaverse real estate is owned by the Big Four. These are the major players in the metaverse economy and include Decentraland, Sandbox, Somnium Space, and Cryptovoxels. These platforms own a total of 268,645 parcels, which are among the highest priced ones on the market.
Sandbox currently dominates the metaverse real estate, owning approximately 62% of the entire market. LAND here currently costs an average of $11,000 with premium lots selling between 20 to 30 thousand dollars. You can buy or rent virtual spaces for various use. There are family homes, commercial spaces, art galleries, and hangout spots of different sizes.
In this UGC-voxel platform, everything is built by the community for the community. Sandbox players and creators buy, sell, and trade voxel creations. They buy LAND and build experiences on them. They can also monetize these experiences using NFTs and SAND, the utility token of Sandbox.
In the past few years, the Sandbox has forged strategic partnerships with game companies like Atari, investors like Square Enix, brands like Shaun the Sheep, and celebrities like Snoop Dogg. These partnerships have given it more appeal both as a creative space and as an investment platform.
Decentraland is a 3D VR platform built on the Ethereum blockchain. Ownership of land parcels is given through LAND NFTs with the specific coordinates on the grid and a reference to parcel details. To purchase LAND, users must have MANA tokens, which are also used to purchase in-world products and services.
The virtual world of Decentraland is clustered into districts with each one having a unique type of content. Users can traverse these areas to interact, view, and share content. For creators and brands, these districts give them more targeted traffic that enables them to bring their content to specific audiences.
If you’ve been playing Minecraft, you’d feel at home at Cryptovoxels. In this virtual world, you buy land and build on it using monochrome blocks. Customize your designs by adding colors and other elements you can purchase with native $COLR tokens. The platform also has built-in tools for editing, creating avatars, and chatting.
Creators and brands can purchase digitized land to build galleries and stores that showcase their curated collections, products, or services. A parcel of land at Cryptovoxels currently sells at an average of $5,000 per lot, but prices can go as high as over $10,000 depending on the size and location of the property. Like other virtual worlds on the Ethereum blockchain, land ownership is permanently recorded on the blockchain.
Somnium Space is a blockchain virtual reality metaverse built entirely by the players themselves. The 3D virtual world gives users immersive VR experiences that can be accessed on desktops and on mobile devices.
The virtual space is divided into parcels of three different sizes: small, medium, and extra-large. You can choose from waterfront or roadside properties to build your own space. You can import objects such as avatars and monetize your digital assets.
Land parcels and in-game assets in Somnium are tokenized. Ownership is authenticated and recorded on Ethereum and Solana blockchain. Parcels in Somnium Space sell for a median price of $11,500. The most expensive lot was sold for $43,100 in February 2022. Those interested in purchasing parcels but with limited funds can still grab smaller parcels sold at around $2,000 to $4,000.
Aside from the Big Four, there are now more than a dozen platforms selling metaverse lands. Other alternatives include Axie Infinity, Star Atlas, Bit Country, and Aavegotchi.
How to Choose Which Parcels of Land to Buy on the Metaverse?
Just like properties in the real world, location plays a factor in choosing a virtual land in the metaverse. Parcels in The Sandbox and Decentraland continue to increase in value as big brands like Atari, Samsung, Miller Lite, and Adidas stake their claims on these virtual worlds. Many early buyers of lots adjacent to them or within the vicinity have raked in massive income from their investments.
If you plan on investing in metaverse real estate, look for areas that have the potential for development. Places where people can potentially congregate will be more valuable than those in nondescript areas. Consider plots of land near but not within developed districts. You can score these properties at relatively lower prices, build on them, and wait for prices to drive up.
Statistics on Metaverse Real Estate
To help you make a data-driven decision on whether to invest in metaverse properties or not, we have collated the latest statistics on the industry. Go over these numbers to assess if metaverse real estate is a worthwhile investment.
- Sandbox LAND grew by 15,000% in 2021. It also had the largest transaction volume in the same year with a total amount of $350 million for 65,000 transactions in virtual land.
- In 2021, metaverse real estate sales on the four major platforms reached $501 million and are expected to double to $1 billion this year.
- A research study that put the market size value of the metaverse at $47.69 billion in 2020 forecasts the same market to have a revenue of $828.95 billion in 2028.
- The average price of a parcel in major metaverse platforms has increased from $1,265 to $12,684.
- Metaverse real estate investments come from only about 25,000 individual crypto wallets.
Most statistics on metaverse real estate appear to be positive. They indicate massive gains for early “settlers” on the virtual platforms. However, you must keep in mind that these worlds are new and not yet fully established. The numbers may be tempting, but you may have to delve further and look beyond statistics.
Risks and Challenges of Investing in the Metaverse
Although the metaverse is expected to grow tremendously in the next few years, it is still a relatively new industry that is far from stable. For one, if a metaverse platform goes offline permanently, all your land and assets in that platform become non-existent.
Then there’s also the issue of valuation. There’s always the question of how to assign value to a land whose scarcity is artificial and whose future value cannot be quantified. With their value dependent on highly volatile cryptocurrencies, metaverse land is susceptible to volatile conditions as well.
Big Risks with Potentially Big Rewards
Rife with uncertainties, investing in metaverse properties is highly speculative in nature rather than prospective. To say that the risks are big is an understatement. In the virtual world, you can lose all your investments in a blink of an eye. However, the rapid shift to full digitalization in almost all industries can also potentially reap big returns on metaverse real estate investments.
Before you make any investment decision, learn as much as you can about the metaverse. Understand all the risks and challenges, and weigh them against the potential benefits. Only after you have thoroughly researched all the pros and cons should you make your decision.