It’s no secret that the real estate market is soaring, but the Covid-19 pandemic is sparking another little-known land boom. In fact, some investors are paying millions for lots — not in New York or Beverly Hills. In fact, these tracts don’t actually exist on Earth.
Instead, the land is located online, in a set of virtual worlds that tech insiders call the metaverse.Since Facebook announced it’s going all-in on virtual reality, it even changed the company’s name to Yuan platform.
“Metaverse is the next iteration of social media,” said Andrew Kiguel, CEO of Toronto-based Tokens.com, which invests in Metaverse real estate and non-fungible token-related digital assets.
“You can go to carnivals, you can go to concerts, you can go to museums,” Kegel said.
In these virtual worlds, real people interact as cartoon characters called avatars, similar to real-time multiplayer video games. Today, people can enter these worlds through ordinary computer screens, but Meta and other companies have a long-term vision of building 360-degree immersive worlds that people will enter through virtual reality goggles such as Meta’s Oculus.
a recent report Crypto asset manager Grayscale estimates that the digital world could grow into a $1 trillion business in the near future.
Kiguel’s company recently closed down Nearly $2.5 million on a piece of land In Decentraland — one of several popular metaverse worlds. “Prices have gone up 400% to 500% over the past few months,” Kiguel said.
Another popular virtual world is the sandbox, where Janine Yorio’s virtual real estate development company Republic Realm spent a record $4.3 million on a virtual piece of land.
Yorio told CNBC her company last year sold 100 virtual private islands for $15,000 each. “Today, they sell for about $300,000 a unit, which coincidentally is the same as the average home price in the U.S.,” she said.
“For some people, the digital world is as important as the real world,” Miami real estate agent Oren Alexander told CNBC. “It’s not about what you and I believe, it’s about what the future holds.”
Like property in the real world, Kiguel says the metaverse is about three things: location, location, location.
“When you first go into the metaverse where people gather, there are areas — those areas are definitely more valuable than areas where nothing happens,” Kegel said.
To be sure, those high-traffic areas are attracting big money.
“Think of the board game Monopoly. We just bought the Boardwalk and the surrounding area,” Kiguel said. “The areas where people congregate are more valuable to advertisers and retailers because they’re looking for ways to get in there and access that group of people.”
For example, Snoop Dogg is building a virtual mansion on a plot of land in the sandbox, Someone recently paid $450,000 to be his neighbor.
“I think it absolutely matters who your neighbors are,” Yorio said. “It’s like almost anything, right? It’s like a club where you want to be with like-minded people.”
Buying virtual land is easy — Directly from the platform or through the developer. Investors build on their land and make it interactive. “You can decorate it, you can change it, you can refurbish it,” Yorio said. “It’s the password.”
But Yorio warns that investing in digital real estate is a risky business.
“[It’s] High risk, high risk. You should only invest capital you are prepared to lose,” Yorio told CNBC. “It’s highly speculative. It is also blockchain based. Cryptocurrencies are notoriously volatile. But it can also pay big dividends. “
Mark Stapp, professor and director of real estate theory and practice at Arizona State University, agrees. “I don’t put my money into something I don’t care about losing. Of course I don’t,” Stapp said. “If it continues like this, it’s likely to become a bubble. You’re buying something that has nothing to do with reality.”