Real Estate in the Metaverse: Market Trends, Opportunities, and Tips
A 31-years old Indonesian, named Clerkclirk, bought a virtual penthouse for $36,000 and sold it just two days later for more than triple of the original price. Another investor in real estate in the metaverse, Armando Aguilar, proudly said, “My metaverse backyard is appreciating more than my real estate.” Aguilar’s virtual land in the Sandbox metaverse platform surged 1,400 times its original value.
To replicate the aforementioned success, more and more businesses and private investors buy land in the metaverse. If you are considering purchasing virtual property and benefiting from metaverse software development services, you are probably asking yourself a set of questions: How to buy virtual real estate in the metaverse? Is it safe? How to choose the right spot? And how much will it cost?
Keep reading, and hopefully, this will help you make your decision.
What is metaverse real estate?
Metaverse real estate are parcels of land or commercial and residential buildings that exist in a virtual world. On that land, you can create all types of property — from advertising billboards to commercial districts and headquarters of companies that exist in real life. In the simplest sense, the metaverse real estate objects are pixels on your computer screen. But they are also programmable spaces on different platforms where people can socialize, sell non-fungible tokens (NFTs), play games, advertise their products and services, and even attend business meetings via 3D avatars.
This is how Janine Yorio, CEO of Republic Realm, explained metaverse real estate in New Rules of Business podcast, “Metaverse real estate is an NFT. They are a JPEG or [digital file that] points to a specific file that is logged on the blockchain, which is this ledger that tracks who owns [each asset]. Much the same way that if you bought land in a town, you’d go to the town hall and open a drawer to find your deed. Instead, you’re looking at the blockchain.”
Since Facebook rebranded itself as Meta, in 2021, the value of real estate in the metaverse market has increased significantly, and it is predicted to continue rising at a CAGR of 31.2% from 2022 to 2028.
How to buy real estate in the metaverse?
To buy virtual land in the metaverse, you first need to get hold of cryptocurrency. Some metaverse platforms provide their own coinage. For example, Sandbox trades its native cryptocurrency SAND, and Decentraland uses MANA. Sometimes, general-purpose cryptocurrencies, such as Ethereum, work as well.
Even though the land is virtual, it is secured with a very real thing, NFTs. When someone purchases real estate in the metaverse, this transaction is recorded on the blockchain, and the corresponding NFT transfers into the buyer’s digital wallet. Metamask and Binance wallets are rather popular.
You can buy virtual properties directly from your platform of choice, or you can benefit from third-party resellers, such as nonfungible.com, a platform that allows owners to list their property and buyers to negotiate the price.
Metaverse real estate prices
Real estate in the metaverse costs are skyrocketing. Take, for instance, Decentraland. When the platform held its first auction in December 2017, it sold parcels of land for $20 each. By 2021, the cost of this commodity catapulted to $6,000, and it kept increasing to reach $15,000 by the start of 2022. Virtual land on the Sandbox, another metaverse platform, grew by 15,000% in 2021.
Prices of virtual land plots can vary significantly based on their size, platform, and location. You can get a small parcel in Somnium Space for $6,362, while a lavish plot on Decentraland would cost you $2.4 million.
When you prepare for metaverse real estate investing, don’t forget about all the accompanying expenses. Besides the parcel’s price, you are likely to pay processing fees, which can amount to 5% of the land price, in addition to gas fees for Ethereum-based projects. Also, some metaverse platforms require you to trade in their native cryptocurrency. If you don’t have those, be prepared to exchange one currency for another with all the losses that this transaction entails.
Metaverse real estate platforms
There are four commonly used metaverse platforms — The Sandbox, Decentraland, Cryptovoxels, and Somnium Space. The first two offer a well-established infrastructure and feature celebrities as landlords and tenants. The Sandbox is particularly popular with celebrities. According to Yat Siu, Co-founder of Aminoca Brands, the owner of the Sandbox, “What makes Sandbox land valuable is not the fact that they’re blocky pieces of land. It’s the fact that the most influential people in the space are building on it.” This list includes Paris Hilton and Snoop Dogg, who owns a mansion and throws parties.
The four platforms together offer 268,645 parcels of land varying in size. Below you can find a brief description of every platform, and a graph representing sales for a one-month period. The graphs for all four platforms are constructed for the same timeline, so that you can compare them for profitability.
With 166,464 parcels, 96 x 96 meters each, this metaverse real estate platform owns approximately 62% of the entire market. It has its cryptocurrency — i.e., SAND — and it uses the Ethereum blockchain.
The Sandbox leans towards gamification. It supplies users with tools to craft items and even create their own games. The platform consists of three integrated products:
- VoxEdit. This is a powerful 3D voxel modeling and NFT creation package, which allows participants to build and animate objects, such as humans, animals, tools, etc. Created items can be exported into the Sandbox marketplace to represent game assets.
- Marketplace. This is the marketplace where users can upload and sell their VoxEdit creations. All items are first uploaded to the IPFS network for storage and are registered on a blockchain to prove ownership. Afterwards, items become assets and can be exhibited and sold in the marketplace.
- Game Maker. It allows users to develop games for free with the help of visual scripting tools.
Participants can generate revenue by creating assets and games, and by buying and renting land. The Sandbox secured over 50 partnerships with renowned companies and brands, such as Atari and Dapper Labs.
Decentraland contains 90,601 parcels of land 16 x 16 meter each, and the whole metaverse is divided into several districts. This real estate in the metaverse platform is built on the Ethereum blockchain and is entirely user-owned, allowing the participants to create avatars, marketplaces, and virtual settings. It offers its native cryptocurrency, MANA, which can be easily purchased through popular crypto exchanges.
There are two ways to create digital content on Decentraland:
- The Builder is a drag-and-drop visual tool. Users have access to a large number of pre-made items, including interactive items that react to players’ feedback. It is also possible to import custom models.
- The SDK supports writing code, which gives great flexibility for creating items and scenes
Participants can generate revenue by creating and selling items, but also by advertising and offering paid experiences to other users.
This real estate in the metaverse platform is also powered by the Ethereum blockchain. It offers 6,554 land plots with an average price of $5,000 per lot, but some premium locations can sell for as much as $10,000.
Users can buy land parcels and create storefronts, art galleries, theaters, and mazes. Visually, this game looks like a combination of Minecraft and Facebook. Users build blocks and then customize their design by adding text, images, and audio files. Participants can make money by selling their avatars, unique usernames, and NFT items, as well as reselling virtual land.
One innovative feature of this platform is supporting VR headsets, such as Oculus Rift and HTC Vive.
This metaverse real estate platform contains 5,026 parcels of land that can come in three different sizes: small, medium, and extra-large. One can buy small parcels for $2,000 to $4,000, while large plots can cost up to $43,000.
Somnium Space offers an immersive VR experience and can be accessed through a laptop or a mobile device. It offers a software development kit to support users in the creation and customization of their own avatars and property. The platform’s cooperation with the Polygon network allows participants to transfer their assets in and out Somnium Space to reduce fees.
This metaverse platform allows users to tokenize their avatars, land, wearables, vehicles, tickets etc. using the Ethereum blockchain and has no stakes in their earnings. In addition to monetizing items, property owners can sell teleportation hubs and organize treasure hunts.
Why invest in the metaverse real estate?
Generally speaking, metaverse technology presents many opportunities for business leaders. There are several reasons to purchase land and other real estate objects in the metaverse:
- Buy and sell when the property appreciates in value
- Conduct business by selling advertising spots, hosting events, collecting rent, etc. For example, to host an event, you can simply rent a concert hall or another space, create and sell tickets, and create NFT merchandise to monetize at your event
- Have fun with the property and use it to socialize, express your personality, and demonstrate digital collectibles
Even though the real estate in the metaverse market fairs rather well at the moment, there is no guarantee that prices will keep going up. There are several risks associated with this type of investment:
- This market lacks regulations. If the seller acts in bad faith, the buyer’s opportunities for seeking restitution are limited.
- Virtual land’s valuation. In the real world, land is a finite resource, and it increases in value as more people show desire for ownership. However, virtual land is infinite in theory. Metaverse platforms are enforcing artificial scarcity by limiting the number of land plots they sell. But if all is sold and the demand remains, nothing prevents those platforms from programming more land plots.
- Potential technology-associated risks. The trade occurs in cryptocurrency, and the proof of ownership is stored as an NFT. If the buyer forgets their password or otherwise fails to authenticate, the ownership right will be compromised. Also, if your metaverse platform goes offline, the property disappears.
- Technological advances, such as quantum computing, can, in theory, render today’s cryptographic security methods obsolete.
#How to choose the right spot to invest in
- Study the performance metrics of the selected metaverse platforms, such as the number of users interacting on each platform and the type of companies conducting business in this virtual reality
- After settling upon one metaverse platform, carefully consider the location of your prospective land. Parcels around famous brands and celebrities are fetching premium prices.
- Check out the price history at your metaverse real estate of choice to see how much it has appreciated or depreciated over time
Examples of real estate in the metaverse
Republic Realm, purchased land worth $4.3 million from the Sandbox. The company decided to develop 100 islands on the property with their own villas and boat market. Ninety of them were sold on the first day for $15,000 each, and some owners are listing their acquisitions for resale for over $100,000.
Another large transaction comes from a crypto investor Tokens.com who acquired virtual property on Decentraland for $2.4 million. The land is located in the Fashion Street area, and the company is planning to host digital fashion shows with brands such as Dolce & Gabbana and Tommy Hilfiger. As Tokens.com CEO, Andrew Kiguel said, “We don’t want to sell the land, we want to continue buying land.”
Property development companies also don’t want to stay behind and try to harness this new technology to gain competitive advantage. For instance, Magnolia Quality Development Corporation (MQDC), a leading international property developer, teamed up with Accenture to create a virtual real estate metaverse. Visit Malaisirirat, Chief Executive at MQDC said, “This approach has made us a technological pioneer to bring sustainable well-being to people and society in an era of digital transformation.”
According to Mr. Malaisirirat, the collaboration with Accenture focuses on providing MQDC’s customers with experience beyond imagination, opening opportunities for clients interested in the metaverse in the context of property development, and simply offering a space that connects virtual and real worlds, allowing people to have a hybrid experience.
Other activities include:
- Warner Music is planning on hosting concerts at its property in the Sandbox
- Barbados decided to open its embassy in the metaverse
- An anonymous user has recently paid $450,000 to acquire a land parcel in the Snoopverse — a metaverse owned by Snoop Dogg
Real estate in the metaverse: market trends and predictions
Real estate in the metaverse sales amounted to $501 million in 2021 and already exceeded $85 million in January, 2022 alone. Going at this pace, this market could reach $1 billion by the end of 2022.
Big companies, such as Meta, Nvidia, and Microsoft, are betting on the metaverse to become the next generation of the Internet. If this materializes, real estate in the metaverse will offer many opportunities for businesses and influencers to build new audiences, create and market new products and services. This excitement is supported by Accenture’s recent survey, which shows that 71% of global executives questioned by the consultancy report that metaverse will be beneficial for their business, with 42% believing this technology will have a transformational impact.
However, there are factors that work against the metaverse. The Quarterly NFT Market Report shows that NFT sales volume in the metaverse is still rather modest in comparison to other NFT segments.
Additionally, some audiences, especially the older generation, doubt that the metaverse will live up to its promises. For example, Edward Castronova, Professor of Media at Indiana University, believes, “The Metaverse is El Dorado for internet startups. They chase it into the jungle and die.”
Andrew Kiguel, CEO at Tokens.com, a digital assets company based in Canada, replies to this by saying, “The problem a lot of people have is that there are generations that have a difficult time attributing value to things that are digital, that you can’t hold and that don’t have weight.”
Deloitte, also concerned with the future of the metaverse, recently published a report saying that the future of this technology depends on four factors:
- Standardization: will there be a unified economy across metaverse platforms together with consistent design and programming standards?
- Market fragmentation: will different platforms serve different use cases, or will they compete for the same customers?
- User interface: will the platforms offer intuitive interface and seamless user experience?
- Governance: will there be strong government regulations to ensure secure transactions and prevent fraud, or will every platform have to implement their own rules?
There is no reliable way to determine whether your real estate in the metaverse platform of choice will survive in the future. But it is safe to say that if this platform has an engaged and loyal community, its chances of flourishing are higher. So, if you decide to purchase virtual land in the metaverse, you can try organizing community events or building something interesting that people would want to be around.
Thinking about investing in real estate in the metaverse? Get in touch! ITRex experts will help you select the metaverse platform that satisfies your needs. Then you, together, will build real estate 3D models and implement the business logic behind your custom solution.
Originally published at https://itrexgroup.com on May 18, 2022.