In our last Metaverse blog, we introduced the concept and explained some of its main use cases. Today, we’re focusing on an increasingly popular application of the Metaverse - real estate.
Virtual real estate may sound like a gimmick, but believe it or not, sales of land in the Metaverse topped $500 million last year and are projected to double this year.
So, what’s the deal?
Land in the Metaverse is divided into plots of virtual real estate that are represented by NFTs. Depending on the platform they’re sold on, the land can be used for gaming, socialising or building virtual businesses on.
The most expensive areas to buy land in are those in which the most users spend their time. So, a bit like real life in that respect. To demonstrate, someone reportedly paid $450,000 to be Snoop Dogg’s neighbour in the virtual world known as the Sandbox.
The average price of a parcel of real estate in the Metaverse is currently about $11,000. So, there’s clearly quite a market for it.
Buying virtual real estate means you own a unique parcel of land in a particular world within the Metaverse. But why do people do it?
Like a lot of things, the main motive is money. With all the hype surrounding the Metaverse lately, it isn’t surprising that everything it encompasses is appreciating exponentially.
While there are multiple different ways to make money from land you own in the Metaverse, the most popular methods appear to be flipping or letting virtual property. Just like on planet Earth, land in the Metaverse can be bought, developed and then either sold for a higher price or let to tenants to make money.
But why is it worth anything in the first place? Virtual land manages to hold its value because each Metaverse platform decides exactly how many parcels of land there will ever be, creating scarcity.
Although the Metaverse is expected keep growing in the coming years, it is still a relatively new concept, which means it comes with risks.
An important question to consider when buying virtual land is how value can be assigned to something whose scarcity is artificial and whose future value cannot be quantified.
Another concern is that property in the Metaverse derives its value from cryptocurrency, which in itself is highly volatile. This means that investing in virtual real estate is a highly speculative activity and shouldn’t be done lightly.
It’s impossible to predict which way the virtual real estate bubble will go.
Raisa Bruner writes in Time that it could “disappear into the ether of the internet in a few years, like Limewire and Kazaa”, or just as easily be “a future Spotify.”
So, what do you think - would you buy land in the Metaverse? If so, why, and what would you do with it? Let us know in the comments!