Virtual real estate in a speculative future bubble Metaverse?

After the NFTs, real estate in the metaverse is as fascinating as it is baffling. What are these virtual lands used and what does the market look like today?

Seen as one of the next great turning points in Web3, the metaverse is seen as replacing social networks, companies or celebrities who are already, logically, looking for ways to invest in and make money. Pending the popularization of these platforms and user access and innovative features, investing in virtual real estate is already a trend. A runaway quickly led to a price explosion.

what is the point ?

As in real life, buying land in the metaverse allows you to build a building there. Strictly speaking, these are not residences, but places to represent a brand or create experiences – which, of course, will be monetized – for visitors. At the moment, it is mainly up to buyers to occupy the territory and draw attention to their brand. Many of them are also investing in the hope that they can rent the land or resell it at a higher price when there are more users. So, just speculation.

To get one of these lands, all you have to do is go to sites that sell NFTs, such as Opensea. Specialized real estate agencies such as Agence Voxel and Metaverse Property are also starting to develop, even if there are few offers available on their sites. It is necessary to own cryptocurrencies to embark on such an investment.

A market focused on four players

Today, virtual real estate is sold primarily in four metaverses: Sandbox, Decentraland, Cryptovoxels, and Somnium Space. Among them, there are a total of almost 270 thousand plots of land, the turnover of which in 2021 amounted to 500 million dollars (455 million euros). Sandbox stands out very clearly, because it accounts for more than 60% of the market and is the platform on which plots of land are the most expensive: according to a study, its price doubled by 300 between December 2019 and January 2022.

This price increase is directly related to a deliberately limited amount of land: there are 160,000 in the Sandbox and 90,000 in Decentraland. As with real estate, prices vary depending on the area in which the land is located, but also according to its neighbours. For example, the average land price at The Sandbox is $11,000, but the one next to rapper Snoop Dogg’s virtual mansion has been valued at more than…$400,000.

Buying virtual real estate today is still a small minority business, with all investments coming from just 25,000 crypto wallets. Brands and celebrities prefer to catch up on it early — even if it fails — rather than catching up after their competitors. Especially since the most optimistic studies predict significant growth: the metaverse market could grow from $47.7 billion in 2020 to $829 billion in 2028.

risky investments

Where the clash between real and virtual real estate is that a long-term mortgage is possible in the real world because the property is supposed to still be around 20 years from now. In the metaverse, it is still very recent, because it is very difficult to predict what this phenomenon will become in the coming years. If a platform is closed, land will be lost. This would explain why the land in the Sandbox sells so well despite being more expensive: it’s seen as the metaverse that is least likely to disappear.

Another danger is Web 3 in general is not regulated and decentralized in general, which means that there are very few possible solutions in the event of a scam. Finally, the scarcity of land is made by platforms from scratch. Nothing stops them, technically, from adding as many as possible if metaverses ever become popular. Of course, this can have implications for pricing.

As for the risk of a speculative bubble, it worries platforms, as Somnium Space founder Artur Sychov explains: “While interest in virtual real estate has increased over the past six months, it is clear that most people do not fully understand the potential uses of this land. Only real monetary value should be attached to virtual goods that have real benefit to their owners, otherwise there is a high risk of a speculative bubble that will harm consumers and businesses. »

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