IS INVESTING IN VIRTUAL REAL ESTATE PROFITABLE NOW?

In the past few years, virtual real estate has emerged a potential new investment trend.  But only after the virtual universe developed, did virtual real estate really explode, as more and more countries and individuals of the super-rich pour money into virtual lands, causing the price of this real estate type to skyrocket. Is investing in virtual real estate profitable now?

When virtual universes are not yet fully connected, investors expect that virtual real estates that they buy now to become a Paris, New York or Manhattan in the future.

The virtual real estate has been the most profitable segment since the arrival of the digital revolution and has attracted millions of dollars in investments from reputable companies.

ph: Decentraland

According to consulting firm MetaMetrics Solutions, total virtual real estate market capitalization has surpassed 500 million USD in 2021. The top 10 metaverse platforms sold $1.9 billion worth of virtual real estate, and these platforms are expected continuously to reach $5.4 billion in revenue by 2026.

With these fascinating numbers, it's no surprise that everyone from large companies to venture capitalists are creating premise for virtual real estate across all the leading metaverse platforms.  The company Meta (formerly Facebook) of billionaire Mark Zuckerberg has invested about 10 billion USD in its own metaverse world under the name "Horizon Home".

Referring to the record deals in the virtual real estate market, Republic Realm must be mentioned, the company invested $4.3 million to take ownership of a virtual land plot on The Sandbox - A virtual universe game helps people to interact and participate in concerts.

At the end of 2021, the Canadian company Tokens.com also spent up to 2.4 million USD to be able to win the right to own a prime land plot on Fashion Street of Decentraland platform - One of the oldest digital projects in the crypto market space was founded in 2017.

Some businesses also benefit from property leasing in the metaverse.  For example, Lorne Sugarman's Metaverse Corporation leases virtual real estates and has a team of developers tasked with building upon the tenant's vision.

Samsung is also building a virtual version of its flagship store in New York where customers are allowed to try on products.  Adidas also owns asset in The Sandbox where it sells digital sports equipment as NFTs.

In The Sandbox virtual world, a virtual land lot with the property ID LAND #33316 was sold on August 12, 2021 for $13,140.81, although it was previously priced at only $38.7 on March 31, 2020.

Similarly, at the beginning of the game Decentraland, a land plot originally sold for 452.98 USD on December 25, 2017, after 4 years has increased to 26,246.25 USD.  In the game Axie Infinity, a piece of Genesis land in the world of Lunacia was sold for up to 550 ETH (equivalent to about 2.3 million USD).

The virtual real estate ecosystem works similarly to reality.  Meaning, both ecosystems have similar related parties as land owners, developers, buyers and sellers although a prominent distinguishing feature of virtual real estate is absence of governing body for virtual real estate.

Furthermore, property location is considered very important to the value of a virtual land piece just as it is in the real world.  For plots of prime location, the price can reach a record up to 758,250 USD.

Virtual real estate prices peaked between the end of last year and the beginning of this year, but the crypto market slump and the metaverse push is slower than expected have caused overall market value to drop 85% since January.  At the same time, the trading volume is down more than 90% from the peak of November 2021.

The average price of virtual real estates sold on Decentraland peaked at $37,238 in February of this year.  But since August 1, their prices have dropped to an average of $5,163.  Similarly, the virtual real estate average selling price on The Sandbox has dropped from about $35,500 in January to about $2,800 in August.

Map of digital asset zones of The Sandbox displays dozens of properties for sale. The poor number of virtual real estat sales further shows that users' interest in metaverse projects is dwindling.

On a weekly average, volume which represents the amount of land (in currency) traded, has fallen from a peak of $1 billion in November 2021 to about $157 million in August 2022.  
 

ph: Decentraland

Besides, the legality of virtual real estates is also a question asked by many investors. 

Of course, the real estate price slide is heavily influenced by market factors and can not expect this virtual real estate market to develop significantly in the context of not-flourishing cryptocurrencies and the sell-off of technology stocks since the beginning of the year.

In the unstable market with many economies fearing a recession and the technology and cryptocurrency markets are not very prosperous as well as regulations for virtual real estate have not been clearly, investors certainly cannot expect their virtual real estates to be profitable soon.

IS INVESTING IN VIRTUAL REAL ESTATE PROFITABLE NOW?

• Tags
• real estate
• property
• investing
• virtual real estate
• metaverse real estate