Bust or Boom? Real Estate Prices in the Metaverse
Ever since Meta (up until recently known as Facebook) announced in October of 2021 that they’d be investing in the metaverse, there’s been a virtual real estate land rush. Big brands, such as JP Morgan, Samsung, and Nike have all purchased land in the metaverse. Some brands — as Republic Realms, which spent $4.3 million on land in The Sandbox — are buying staggering amounts of land.
But what factors determine these land prices? And what would anyone ever need or use virtual land for? In this article, we will break down some of the central reasons for purchasing virtual land; what can be done with and built on, it; the range of its costs depending on the platform; and the ways that that same plot of virtual land, can be utilized in the future, due to its use of the blockchain.
In real estate, location is everything. There’s a reason a house in London would set you back over £500k while you can buy one in Wales for £200k. Similarly, there’s a reason a studio apartment in Manhattan costs nearly the same as a single-family home in the suburbs of Philadelphia, for instance. And that reason is location. The metaverse is no different. Being centrally located near or adjacent to a central landmark, building, or even nightclub will, for instance, entail a higher price of land than a plot requiring a ‘commute’. In Decentraland, for instance, that means you want to be near ‘Genesis Plaza’—the central welcoming place and the primary hub when entering the platform.
The biggest location factor that influences price is visibility. Imagine you’re a company and you want to advertise to as many people as possible — you’d want a location where the highest number of people possible would see you, right? With platforms such as Roblox attracting 47 million users every day, the most popular metaverse hangouts are widely visited, across the globe.
An amazing location can also mean famous neighbors... With celebrities such as Snoop Dogg and Paris Hilton owning land in the metaverse, areas nearby are in high demand, meaning a high price tag. Again: metaverse mirrors IRL.
Each metaverse project contains plots of land, often known as parcels, but the amount of land parcels in each project varies. For example: The Sandbox has 166,464 plots of land, whereas Somnium Space only has 5,026. Dependent on the size of the metaverse in question, the maturity of its platform, and the hype surrounding that platform, will all help determine land prices in each.
The more land a project has, the less valuable each piece of land is. Some metaverses, like Nifty Island, give away land for free. But that concept — of giving away land as opposed to selling it as NFTs — is a future article’s topic.
Sometimes projects may have particularly rare areas. These plots sold for record-high prices. Wilder World, for instance, has also hinted at the plots of land it will sell in its ‘Wiami’ district, at a yet-to-be-announced date.
Metaverse land is a highly speculative investment.
Hype—plays a huge part in the price of a project. With many projects being released on a regular basis, there is no shortage of potential investment land opportunities; though most of these projects have rather scarce popularity.
Therefore, the amount of community interest in a project plays a huge part in determining its land price. This was clear in the ‘Otherside’ land sale, which had a huge amount of hype because of it being linked to the BAYC. This later caused skyrocketing gas fees, as thousands tried to buy land, which resulted in nearly as much money spent on gas fees as on the actual purchases of land.
During the second quarter of 2022, the crypto market experienced a drop of over 15% in the total locked value of its assets. Since the value of land in most metaverses is measured in various cryptocurrencies — such as $SAND for Sandbox or $MANA for Decentraland — land value has significantly dropped.
Crypto is notoriously volatile — meaning that metaverse land prices are, too.
These are some of the several factors that work to contribute to the changes in metaverse land prices and value. As metaverse ecosystems continue to mature as they develop, prices will fluctuate and drastically change, and whether we are currently in a metaverse land price bubble or boom, is still to be seen.