The real estate market soared at the end of the year and, with the pandemic still underway, physical properties are not enough for some investors in the sector.
Once Facebook announced its bid for virtual reality in October, the prices of “parcels” in the metaverse jumped as much as 500%, and some real estate companies have spent millions on these properties.
A step toward digitizing the real world, the metaverse combines augmented reality (AR) technology with virtual reality (VR) and video. Here users interact as avatars and can do anything from holding a conference to traveling the world.
These virtual worlds can still be accessed through a normal computer, but Meta (Facebook) and other companies have a long-term vision, which includes the 360-degree immersive experience with virtual reality glasses.
“The metaverse is the next iteration of social media,” Andrew Kiguel, CEO of Tokens.com, a Toronto-based company that invests in metaverse real estate and other digital assets, told CNBC.
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Tokens.com recently spent almost $2.5 million on a piece of land in Decentraland, one of the most popular worlds.
In these virtual worlds “you can go to a carnival, a music concert, a museum,” added Kiguel.
In fact, artists like Justin Bieber, Ariana Grande and Marshmello have already been presented with their avatars. Paris Hilton DJed at the New Year’s Eve party on her own virtual island.
A recent report from crypto asset manager Grayscale estimates that the digital world may become a $1 trillion dollar business in the near future.
How to buy a property in the metaverse
To buy a property in the virtual world, it is necessary to register on one of the metaverse platforms, such as Decentraland, The Sandbox or Axie Infinity.
The most important thing is to have “a digital wallet with good funds”, be it ether or native currencies of each metaverse. In theory, properties can be bought, rented, traded, and sold, and the title of ownership is stored as a non-fungible token (NFT).
Experts recommend having a digital wallet compatible with the digital property platform. Metamask is the most popular digital wallet available on the market today. It supports almost every property platform in the metaverse.
One risk to be aware of is that, unlike investing in the real-world real estate market, the digital terrain of the metaverse will cease to exist if the platform on which it is purchased fails and is disconnected from the internet.
A “very very risky” investment
“It is very, very risky. You should only invest the capital that you are willing to lose,” says Janine Yorio, CEO of the virtual real estate development company Republic Realm.
In Sandbox, another “hot” virtual world for investors, Republic Realm spent $4.3 million on a parcel of land.
According to Yorio, the company sold 100 virtual private islands last year for $15,000 each. “Today they sell for around $300,000, which coincidentally is the same as the average home price in the United States.”
“It is highly speculative. It is also blockchain based. And as we all know, cryptocurrencies are highly volatile. But it can also be hugely rewarding.”
Spaces in the metaverse where many people congregate are more valuable to advertisers and retailers who want to reach certain demographics.
“It’s like a club and you want to be surrounded by people who share similar interests,” Yorio said.
For example, Snoop Dogg is building a virtual mansion on some Sandbox land, and someone recently paid $450,000 to be his neighbor.
For the Republic Realm executive, buying virtual land is pretty simple. “You can decorate it, you can change it, you can renew it,” says Yorio. “It’s just code.”