Is buying real estate in the Metaverse area a wise investment?

Real estate in the Metaverse area has exploded since 2021

Since 2021, we’ve seen an amazing property price boom in Metaverse, OR metaverse in French.

Virtual lands are Very profitable investment By more and more investors.

It is also increasingly popular among brands that want to develop their visibility in virtual worlds. PricewaterhouseCoopersAnd AdidasAnd Samsungor Sotheby’s Auctions I have already started investing in Decentraland and The Sandbox metaverses.

Digital marketing experts agree The future of marketing will be played in metaversesInstead of social media. Thus, more and more brands will want to open their doors in metaverses.

👉 READ ALSO – Samsung lands in metaverse by opening shop in Decentraland (MANA)

Samsung 837X, a giant technology store in Metaverse Decentraland

Why this madness for the metaverse real estate?

Virtual real estate is not a new activity. Video game players have been buying and selling land on virtual spaces for a long time.

However, metaverses have recently benefited from significant technological advances, Like Virtual Reality (VR) and Augmented Reality (AR)allowing for a truly immersive experience and engaging the general public.

On the other hand, it is the non-fungible tokens (NFTs) that have made it possible for real estate to thrive on the counties, By providing a guarantee of ownership on the blockchain.

The real estate market within Metaverse has also witnessed a strong acceleration since the announcement of Metaverse Meta, previously Facebook, in October 2021, accompanied by an investment plan Several tens of millions of dollars.

👉 Related – PwC Hong Kong buys a plot of land in the SandBox metaverse

How do you buy land and what are the prices?

Land and Metaverse buildings are NFTs, i.e. Title deeds registered on the blockchain.

It is therefore necessary to have a wallet (“wallet”) and cryptocurrencies in order to be able to obtain them.

Land for sale can be seen in metaverse markets and on NFT sales platforms such as OpenSea.

To own land on the metaverse, you have to budget at the time of writing this article 3 ether at least (ETH) vs. 96m x 96m ejection on Sandbox and 5000 mana Against a plot of 16m by 16m in Decentraland.

For the best-located land, prices can reach tens of thousands of euros, or even several million euros.

And so we can see in 2021 sales of nearly $2.5 million on Decentraland or on Axie Infinity. The current record is still purchased by Republic Kingdoman American real estate company, from land in the Sandbox amounting to 4.3 million eurosin December 2021.

Metaverse Sandbox

Real estate in The Sandbox’s metaverse has skyrocketed since late 2021

What is the purpose of investing in a plot of land from Metaverse?

Commercial and rental investment

First, as with real estate investing, Virtual Earth can be buildable. So one can imagine developing a business there like a shop, art gallery, attraction, etc. income generation.

On the other hand, the plot of land can be rented. Although there is still It is difficult to assess rental market ratesWe can expect a growing demand for commercial space, but also for virtual private residences on metaverses. like that, Billboards can be installed and rent it to advertisers.

In terms of return on investment, Little data is available on this topicHowever, some indicators allow us to hope for very satisfactory returns.

Thus, according to a report by Bloomberg Intelligence, a concert on the metaverse could result in up to Ten times greater turnover than in a real concert hall. Such was the case for Travis Scott’s Fortnite gig, which had a turnover of $20 million.

Likewise, being on the metaverse has allowed Adidas to sell $23.5 million worth of NFTs.

speculative investment

Finally, some investors will buy a title deed on the metaverse for speculative purposes, betting on the potential for metaverses to develop, and thus higher plot prices…

Actually, Subject matter experts predict extraordinary growth From the metaverse industry. Estimates for the year 2024 range from 800 billion dollarsaccording to Bloomberg Intelligence, to 8 trillion dollarsAccording to US bank Morgan Stanley.

If these numbers give hope for big wins, it is recommended that you carefully study the possibilities of the various links, to bet on the right horse. Actually, It has already been proven that the competition between metaverses is fierce. Like social networks, it is entirely possible that some metaviruses will lose their speed, and today’s leaders will quickly become obsolete.

It is also necessary to compare the land well. It is also necessary to study the rules of construction. For example, in Decentraland, the permissible height of the building depends on the surface of the earth.

What are the risks of investing in Metaverse?

If metaverse real estate offers significant upside potential, There are many risks involved in investing In plots of land or virtual buildings.

Beware of price fluctuations

First of all, let’s remember the risks of cryptocurrency volatility. The prices of metaverse tokens (SAND for Sandbox, MANA for Decentraland or SOM for Somnium Space) are subject to very strong changes, depending on current events.

How do you choose the site?

It is very difficult to judge the interest of a piece of land or an area. Little information is available on current projects and the identity of their owners.

How can we analyze the future activity of the neighborhood and the number of visitors when we do not know the intentions of its neighbors?

in general, It is possible to select “interrupts” (or activity areas), with spaces somewhat reserved for casinos, museums or luxury shops. These areas are still very mysterious.

There is also the danger of seeing heterogeneous spaces develop, with The juxtaposition of mismatched activities (For example, a luxury store next to a slot machine attraction or a hip-hop concert hall…). The “retail mix” guaranteed by real malls is not guaranteed in a decentralized metaverse.

Then, if it can be estimated that a central location close to the road would benefit from increased traffic (“traffic”), Is this standard valid in virtual worldsin which avatars can be moved instantaneously, simply by clicking on the URL link?

Metaverse Real Estate

Landline calling rates on NFT platforms can be artificially low

The pseudonym of the owners also leads to uncertainty about the purchase of land on the NFTs platforms.

Many land is for sale in the form of auctions, particularly on the OpenSea platform.

These are many surprises: some plots of land are advertised at low call rates, The bidding is then done automatically by the bots.

unregulated market

Another risk to consider is the lack of regulation.

For example, what happens if you buy a plot of land that is divided, without access to a road, and the neighbor builds a large building that blocks all view and access to your plot?

Amount of land can develop

Finally, unlike traditional real estate, Nothing prevents the creation of new metaverses And new spaces to be built in the same metaverse.

This can bring into question the element of scarcity of land and thus its price.

Conclusion: Diversify your investments

The metaverse real estate can make it possible to achieve beautiful capital gains and impressive returns on investment. It’s also a good method Diversify your investments Between cryptocurrencies and non-fungible assets.

As with managing a cryptocurrency portfolio, investing in the world of Metaverses It requires good information and a good anticipation of risks.

It is also wise to diversify your investments In different terrain and in different regions. Note the strategy of investor Republic Realm, who owns land in 23 metaverses.

In the face of the high prices of these virtual lands since the end of 2021, it is definitely time to pay attention to Metaverse real estate, Taking the time to do a good analysis and measure its risks.

Also beware of the famous FOMO “fear of missing out” or the fear of missing something…

👉 Find our section dedicated to the world of irreplaceable tokens

Sources: Bloomberg Intelligence, Morgan Stanley

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About the author: Blandin Naruzniak

After 15 years of experience in international business, particularly in the Financial Times and Bloomberg, I became a blockchain consultant specializing in non-fungible tokens and metaverses.
All articles written by Blandin Naruzniak.

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