Your dream home just became reality with virtual real estate.
Virtual real estate is booming, with sales topping US$500 million last year. In 2021, The Sandbox, the largest real estate metaverse, saw 65,000 virtual land transactions, totaling US$350 million. Meanwhile, Decentraland, the second-largest virtual world, saw 21,000 real estate transactions worth US$110 million last year. Without doubt, the virtual world is getting more and more important. Join me and make sure you do not miss this upcoming big hit!
What is virtual real estate?
Digital real estate markets are one aspect of metaverses. Metaverses are virtual collaborative spaces where users can play, build, own and monetize their virtual experiences. There, they can socialize, work, learn and shop using augmented (AR) and virtual reality (VR).
For example, in Decentraland’s Genesis City—a plot of virtual land roughly the size of Washington D.C.—investors can buy and own slices of virtual land. Users can “go to a casino, watch live music, attend a workshop, shop with friends [or] start a business” in Decentraland via a web browser or VR headset.
In the Sandbox metaverse, each piece of land is a non-fungible token (NFT) called “LAND”, where users can populate it with games and assets. These games and assets are also NFTs, which are called “GAME” and “ASSET” respectively. The NFTs can then be traded on NFT marketplaces and used to enhance one’s virtual experience.
It sounds like a game, some sort of a SimCity perhaps, but many investors would disagree with that assessment. Users prefer to call Decentraland a platform but not a game. Unlike a game, where there is a story, and you are limited by set parameters, you can build anything and do anything in a virtual world.
How much are people paying for virtual land?
Despite it being a “fictitious” world, people keep spending exorbitant amounts of cash on plots of virtual land. Back in 2021, the average user was already willing to pay up to US$2,000 on the virtual real estate platform. Like NFTs, early adopters will earn very handsome returns on their investment through reselling their own plots. Commercially-zoned and well-designed plots are particularly generating large sums of money, with central, “high-traffic” areas selling for close to US$150,000.
A fan of rapper and singer Snoop Dogg paid US$450,000 to purchase a plot of land in the metaverse next to the celebrity’s own virtual property in the Sandbox metaverse. The universe Snoop Dogg created—Snoopverse—is where he would host private virtual concerts, art gallery exhibitions and parties in the future. Snoopverse includes 122 plots of land, 67 plots of premium land and three estates, encouraging landowners to build on their plots and profit off other residents who come to visit. For example, users can design a museum or create a billboard to showcase the NFTs they have bought to create unique digital experiences for themselves and attract people to come visit their plot.
Who are the leaders of virtual real estate?
The United States is currently at the forefront of the metaverse, having plenty of its companies taking the lead role in the metaverse. With American social media company Facebook changing its name to Meta back in October last year, there is a surge of interest in the metaverse in the country.
China’s tech giants also want to keep up with America. However, they face various obstacles. While Chinese citizens can buy virtual land in Chinese metaverses, they wouldn’t be able to do so with cryptocurrency but only with the local yuan currency or through an overseas bank account. The Chinese government has also advised against buying property on the metaverse, suggesting that any purchase carries risks of fraud, laundering and volatility.
Despite this, Chinese tech companies are still venturing into the metaverse. Tencent, a Chinese multinational technology and entertainment conglomerate, is already musing about the metaverse, “Anything that makes the virtual world more real and the real world richer with virtual experiences can become part of the metaverse.”
Just like other blockchain assets, like NFTs, scarcity and desirability determines the value of the land. While investments could exponentially increase in value in the early stages of metaverse development, the nature of virtual real estate is still speculative and can potentially be volatile.
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- What Are the Different Kinds of “Realities”?
Header image courtesy of Decentraland