Metaverse real estate: Why are people paying millions for virtual properties?

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Metaverse real estate: Why are people paying millions for virtual properties?

Metaverse real estate: Why are people paying millions for virtual properties?

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The increasing popularity of the metaverse has turned this digital platform into the hottest asset for real estate investors.
    • Author:
    • Author name
      Quantumrun Foresight
    • November 7, 2022

    Virtual worlds conduct thousands of transactions daily—from digital art to avatar clothing and accessories. Investors are also buying digital land in the metaverse to expand their digital assets.  

    Metaverse real estate context

    The metaverse involves any immersive digital environment where people can participate in activities (e.g., playing games and attending virtual concerts) and engage in e-commerce transactions. Metaverses are increasingly being viewed as a rebrand of open-world games like World of Warcraft and Sims that were popular during the 1990s and 2010s, but increasingly integrate modern technologies like blockchain (esp. NFTs) and augmented and virtual reality headsets.

    In October 2021, Facebook announced it would rebrand itself to Meta to concentrate on developing the metaverse; after this announcement, digital real estate prices rose 400 to 500 percent in the metaverse. Investors scrambled to purchase virtual private islands, sometimes costing $15,000 USD each. As of 2022, according to digital real estate development company Republic Realm, the most expensive virtual property transaction was a record-breaking $4.3 million USD for a parcel of land in one of the most popular blockchain metaverses, Sandbox.

    Disruptive impact

    In 2021, Toronto-based digital investment company bought a piece of land in the Decentraland platform for over $2 million USD. Prices depend on the location and how event-filled the area is. For instance, in Sandbox, an investor paid $450,000 USD to be a next-door neighbor to rapper Snoop Dogg’s virtual mansion. Purchasing a plot of virtual land can be done directly on the platform or through a developer. The owner can then “build” on this land to make it more interactive, adding homes, decorating, and renovating the space. Metaverse real estate appreciates just as much as a real-life property does. The virtual islands in Sandbox that cost $15,000 USD in 2021 jumped to $300,000 USD the following year. 

    However, not all real estate experts think buying digital property is a good idea. Since investors are buying something not tied to an actual plot of land, there isn’t much value in the transaction except as a form of participation in a virtual community. 

    Implications for metaverse real estate

    Wider implications for metaverse real estate may include:

    • An increasing societal awareness and acceptance of purchasing and trading digital assets tied to various metaverses.
    • An increase in blockchain metaverse communities that come with their own developers, landlords, real estate agents, and marketing teams.
    • More people investing in virtual real estate and owning various types of virtual properties such as clubs, restaurants, and concert halls.
    • Governments, financial institutions, and other major entities buying their corresponding plot of land on the metaverse, such as city halls and banks.
    • Post-secondary institutions creating educational courses on buying and managing digital real estate and assets.
    • Governments increasingly passing legislation that governs the creation, sale, and taxation of digital assets.

    Questions to comment on

    • What other possible assets can people own or develop alongside digital real estate?
    • What are the potential limitations of owning a metaverse real estate?

    Insight references

    The following popular and institutional links were referenced for this insight: