Virtual real estate is the market’s new frontier thanks to the metaverse, so agents and brokers need to know what it means for the industry and how it works.
Nowadays, it seems as if there’s virtual everything. Virtual artwork, virtual events, virtual marketing. But what about virtual real estate? Is that a thing, and if so, can you invest in it?
Enter metaverse real estate(link is external), an online platform where people can connect to play games, release products, offer services, and host events. Businesses often own these virtual properties. And, just like any other type of real estate, they can be bought, sold, purchased, and leased.
The metaverse is still new and still evolving, which leaves many wondering if investing in virtual real estate is worth the cost.
What Is the Metaverse in Real Estate and How Does it Work?
Metaverse real estate can be purchased similarly to how you would purchase an NFT.
A quick recap: An NFT, or nonfungible token, is a unique or collectible virtual item that can be purchased and is housed completely in the virtual world, such as digital artwork.
Just as NFTs are, real estate in the metaverse is bought with cryptocurrency. After the transaction is complete, you receive a unique piece of blockchain code, which serves as a deed of ownership.
Properties are bought and sold on a platform called the “metaverse,” a digital platform where virtual reality and augmented reality are used to create a virtual world. The idea is that a metaverse platform provides a connection between the virtual and actual worlds. Sandbox, for instance, is a metaverse platform that takes shape as a game and a virtual world. Unlike traditional video games in which users simply play through the levels until they beat the game, in Sandbox, users have the opportunity to claim ownership in the world itself. Plots of “land” are bought, sold and traded.
The first step is to set up a digital wallet to use in the metaverse. A digital wallet gives you a way to make transactions through software without cash. There are different kinds of digital wallets, and metaverse wallets are essentially a block chain wallet with some additions. It allows users to work with different cryptocurrencies, transferring, holding, and accepting tokens, but also allows users to administer and grow digital assets.
To participate in a transaction, you must create an account on one of the many metaverse platforms and link it to your digital wallet. Then browse for properties that look attractive to you and make a purchase.
Anyone can purchase in the metaverse, but it is important to identify your reasons for buying digital property and assess whether or not doing so is a good investment. For example, if someone wants to promote their business or invest in something tech forward, the metaverse is probably a good choice. The metaverse also opens up investment opportunities for those who might not otherwise be able to do so since, in general, property prices are much lower than that of traditional real estate.
However, for those who are adverse to the unknown and risk, this might not be the appropriate investment avenue.
Similar to real world transactions, metaverse purchases will go through brokers and property managers. But unlike real life, these brokers and property managers do not need a real estate license(link is external) and are not regulated by any organizations. In this space, buyers and sellers will want to work with someone they can trust.
What Is the Cost of Metaverse Virtual Real Estate?
Virtual real estate values fluctuate depending on demand, but they have been showing an upward trajectory so far. When Decentraland, one of the “big four” of metaverse real estate owners(link is external), held its first auction in 2017, a parcel of land cost just $20. By 2021 they were selling for $6,000, and at the start of 2022, they rose in price to about $15,000. In the metaverse a parcel is 106 yards by 106 yards in size, and is determined by the plot’s number of pixels.
With increased interest in the platform, the potential price tag on a metaverse property seems to have no end. While most properties are priced between $6,000 and $100,000, anomalies will happen. One of the biggest sales, for instance, was the purchase of a property(link is external) adjacent to Snoop Dogg’s parcel in the Sandbox for $450,000.
How Will Metaverse Real Estate Affect the Industry?
The metaverse spells big changes for the real estate industry. Here are some to consider:
- It opens up real estate to a wider pool of investors: The metaverse offers real estate in various shapes, sizes, locations and price points. It can be purchased with a wide range of currencies. The affordability and accessibility mean almost anyone can invest.
- It puts emphasis on size and location over utility: With real world real estate, size, location, and utility are all important factors. In the metaverse, the aim of purchasing land is to develop it or lease it out. This prioritizes size and location, while utility falls to the wayside.
- It can serve as a platform for real-world activities: In the future, people may be hosting more real-world activities on the metaverse including trade shows, exhibitions, weddings, and other social gatherings. This may reduce the demand for brick-and-mortar properties used for these purposes.
Is Metaverse Virtual Real Estate a Good Investment?
Right now, metaverse real estate looks like a terrific investment. As prices rose by as much as 300% in just four years, it seems like a great way to get rich quick.
However, there are risks involved. It’s a relatively new entity and it’s hard to say how successful some platforms may be over the long term. Privacy and security can also play roles in yielding losses. The best advice may be to proceed with caution.
The metaverse presents the real estate industry in a whole new light. So far, it has been highly successful, but as with anything new, time will decide its true viability.
©National Association of REALTORS®
Reprinted with permission
