It is no secret that the real estate market is skyrocketing especially in the centers of large cities, but the Covid pandemic is creating another hitherto little known buying rush. In fact, according to a report from CNBC, some investors are paying millions for plots of land that don’t physically exist on Earth.
In this case, the earth is online, in a set of virtual worlds that experts have dubbed the metaverse. The prices for the lots have risen up to + 500% in recent months, since Facebook announced its all-in on virtual reality, also changing the company name to Meta Platforms.
“The metaverse is the next iteration of social media,” Andrew Kiguel, CEO of Toronto-based Tokens.com, which invests in metaverse real estate and non-fungible digital assets related to tokens, told CNBC. “In the metaverse you can go to a carnival, to a music concert, to visit a museum”. In these virtual worlds, real people interact as cartoon-like characters called avatars, similar to a real-time multiplayer video game. Today, people can access these worlds through a regular computer screen, but Meta and other companies have a long-term vision of building immersive 360-degree worlds, which people will be able to access through virtual reality glasses like Oculus. by Meta.
A recent report by crypto asset manager Grayscale estimates that the digital world could become a trillion dollar business in the near future.
Notable artists, including Justin Bieber, Ariana Grande and DJ Marshmello, are performing in the metaverse with their avatars. Paris Hilton also DJed for a New Year’s Eve party on her virtual island.
Kiguel’s company recently paid nearly $ 2.5 million for a parcel of land in Decentraland, which is one of the metaverse’s various popular worlds. “Prices have gone up 400% to 500% in the past few months,” he said.
Another hot world of the metaverse is the Sandbox, where Republic Realm, Janine Yorio’s virtual real estate development company, spent a record $ 4.3 million on a piece of virtual land. Yorio tells CNBC that his company sold 100 virtual private islands last year for $ 15,000 each. “Today, they sell for about $ 300,000 each, which is coincidentally the same as the average house price in America,” he said.
“The digital world is as important to some as the real world,” Miami real estate broker Oren Alexander tells CNBC. “It’s not about what you and I believe in, it’s about what the future does.”
Just like real-world ownership, Kiguel says the metaverse is about three things: location, location, location. “There are areas, when you enter the metaverse, where people congregate – those areas would certainly be far more valuable than others that don’t have events going on,” Kiguel said. And those heavily trafficked areas are attracting the big spenders.
“Think of the Monopoly board game. We just bought Victory Park and the surrounding area,” said Kiguel. “The areas where people congregate are much more valuable to advertisers and retailers to find ways to access that prospect demographics.”
For example, Snoop Dogg is building a virtual mansion on a lot in Sandbox, and someone recently paid $ 450,000 to be his neighbor. “I think it’s absolutely important to know who your neighbor is,” Yorio said. “That’s kind of true of almost everything, right? It’s like a club, where you want to be around people who share similar interests.”
Buying virtual land is quite simple: either directly from the platform or through a developer. Investors build on their land and make it interactive. “You can decorate it, you can change it, you can renovate it,” says Yorio. “It’s a code”.
But Yorio herself warns that investing in digital real estate is a risky business.[È] highly, highly risky. You should only invest the capital you are ready to lose, “Yorio tells CNBC.” It’s highly speculative. It is also based on the blockchain. And as we all know, cryptocurrencies are highly volatile. But it can also be massively rewarding. “
Mark Stapp, professor and director of real estate theory and practice at Arizona State University, agrees. “I certainly wouldn’t,” says Stapp. “If it continues the way it is going, it will most likely be a bubble. You are buying something that is not tied to reality.”