Virtual real estate in the metaverse, future speculative bubble?

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

Perceived as one of the next big turning points for Web3, especially to replace social networks, companies or celebrities are already logically looking for ways to invest in it and make money. In anticipation of the generalization of these platforms and the arrival of users and innovative features, investing in virtual real estate is already a trend. A runaway who was quick to explode prices.

What’s the point?

As in real life, buying land in the meta verse allows you to build a building there. Strictly speaking, these are not homes, but places to represent a brand or create experiences – which of course will make money – for visitors. At the moment, it is mainly for the buyers to occupy the land and draw attention to its brand. Many are also those who invest in the hope of being able to rent the land or resell it at a higher price when there are more users. Pure speculation then.

To acquire one of these countries, simply go to sites that sell NFTs, such as Opensea. Specialized real estate agents are also beginning to develop, such as Agence Voxel and Metaverse Property, although few offers are available on their site. It is necessary to own cryptocurrencies to embark on such an investment.

A market concentrated on four players

Today, virtual real estate is mainly sold in four metavers: The Sandbox, Decentraland, Cryptovoxels and Somnium Space. Together, they account for nearly 270,000 plots, and their sales reached $ 500 million (455 million euros) in 2021. The sandbox stands out very clearly as it represents more than 60% of the market and it is the platform where the grounds are most expensive: according to a study, their price was multiplied by 300 between December 2019 and January 2022.

This price increase is directly related to a quantity of land that is deliberately limited: there are 160,000 on The Sandbox and 90,000 on Decentraland. And as with real estate in real life, prices vary according to the area where the land is located, but also according to the neighbors. For example, land on The Sandbox costs an average of $ 11,000, but those next to rapper Snoop Dogg’s virtual mansion have been valued at over … $ 400,000.

The purchase of virtual real estate today is still a small minority job as all the investment comes from only 25,000 crypto-wallets. Brands and celebrities prefer to be interested in it early – even if it hits a flop – rather than coming after their competitors. Especially since the most optimistic studies predict significant growth: the metaverse market could grow from $ 47.7 billion by 2020 to $ 829 billion by 2028.

Risky investments

Where real estate and virtual property collide is that a long-term mortgage is possible in the real world because the property is still supposed to be there in 20 years. In the still much more recent metavers, it is very difficult to predict what this phenomenon will become in the coming years. If a platform closes, the ground will be lost. This would explain why land on The Sandbox sells well despite being more expensive: it is perceived as the metaverse that is least likely to disappear.

Another risk, web3 in general is deregulated, decentralized, which means that there are few possible solutions in case of a scam. Finally, the rarity of soil is made from the bottom of the platforms. Nothing technically prevents them from adding as many as desired if the metavers one day become popular. This can of course have price consequences.

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

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