Metaverse real estate sales could top $1B in 2022. How to stake a claim
Investing in digital real estate can be risky and expensive, so here are some things you should know if you try to get in.
It isn’t just the physical world that’s dealing with a red hot real estate market — real estate sales in the digital world are exploding, too.
The digital real estate boom kicked into gear when Meta Platforms (FB) rebranded itself from Facebook in October to focus on developing its version of the metaverse. Sales throughout the various digital worlds are soaring as companies and individuals try to claim their stake.
That boom can make metaverse real estate risky and pricey. Here are some of the basics.
Costs and volume rising
Last year, sales of real estate in the metaverse topped $500 million, according to CNBC, which cited data from MetaMetric Solutions. January sales topped $85 million, and they could reach nearly $1 billion in 2022.
A report from Brandessence Market Research says that the metaverse real estate market is expected to grow at a compound annual rate of 31.2% a year from 2022 to 2028. If the market does indeed reach $1 billion in value this year, that would put the metaverse real estate market at roughly $6.7 billion by 2028.
Just like real estate in the real world right now, land in the metaverse isn’t cheap. Someone just paid $450,000 for a parcel next to rapper Snoop Dogg in The Sandbox, a virtual metaverse that allows users to play, build, own and monetize their virtual experiences.
In November 2021, metaverse real estate and nonfungible token (NFT) investment company Tokens.com spent a record $2.4 million on a plot of land in Decentraland — another popular metaverse world. A week later, virtual real estate investment company Republic Realm topped that record-setting digital real estate transaction by dropping $4.3 million for property in The Sandbox.
Investors and companies are spending millions of dollars to buy digital land in the early versions of the metaverse for what it’s expected to become and to find ways to build commerce into this new landscape.
A recent report by digital currency investment company Grayscale estimates the metaverse to be a $1 trillion business in the near future for advertisers, developers and creators.
So what do you get for the money?
What you’re buying
Parcels of digital land in virtual worlds. These parcels are represented by NFTs that you can buy and sell using that particular metaverse’s native token. Popular metaverses include the Sandbox and Decentraland, but there’s also Axie Infinity, Somnium Space and Upland.
Generally, these lands allow users to virtually visit games, stores and such sites, including potentially your parcel and whatever you build there.
This all lacks tangibility and doesn’t exist in the physical world, but that doesn’t mean it isn’t valuable. If you’re getting in at the early stages of the metaverse, who knows what your land could be valued at down the line?
But it could also depreciate.
What virtual land costs
At the time of this writing, the cheapest parcels of land on The Sandbox and Decentraland are going for 3.69 Ethereum (ETH) tokens and 5,100 Decentraland (Mana), which translates to roughly $9,681 and $13,413, respectively.
But sales prices have run into the millions for a parcel, and asking prices can run even higher.
It’s important to remember that digital land could become worthless if the metaverse that you bought the land from fails and goes offline. Or it could soar if the next Snoop Dogg moves in next door.
The land value is also tied to the platform’s underlying token. Cryptocurrencies in general are volatile, which means your property value can fluctuate too.
How to buy digital land
Follow these steps to buy real estate in the metaverse.
- Choose a property marketplace. Choose a metaverse such as Decentraland or The Sandbox, sign up and log in on the platform.
- Browse available land. Compare the pricing of different plots of land and select a parcel you’d like to buy.
- Link your digital wallet. Get a compatible digital wallet and link it to the platform to pay for your land. Metamask is a popular digital wallet available right now.
- Fund your digital wallet. ​​Fund your digital wallet with a compatible cryptocurrency. Decentraland requires MANA or ETH, while The Sandbox requires its native token SAND or ETH.
- Purchase your land. Your digital land is stored as an NFT in your linked digital wallet.
What are the risks?
The metaverse is far from settled, and there’s no guarantee your parcel of digital land will increase in value.
As noted earlier, your digital land is tied to the underlying token of the platform. As it fluctuates in price, so too can the value of your land.
And your land can disappear if the metaverse platform on which you bought the land fails.
So should you buy digital land in the metaverse? Consider treating it as any speculative investment and know that it can lose all its value.
The old saying in real estate is that it’s the one asset no one can make more of. In the metaverse, they can.
If you want to start exploring, take a look at our guides to Decentraland and The Sandbox.
At the time of publication, Matt Miczulski owned ETH.
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