As a biz journalist, Trine has covered finance from NY, tech from Silicon Valley, and the blockchain space.
The coronavirus tremors shaking up the global real estate market are not stopping people from realizing the ‘American’ dream of owning a home. In virtual worlds, land plots are selling like hot Bitcoins. Or if it’s a castle, casino or office building you fancy, that’s all possible too.
Among Cyber Punks and sports trading cards, virtual land plots are a top 10 selling NFT as real estate investors turn their attention to virtual lands. A bonafide real estate economy is developing in virtual worlds as more economic activity shifts to the blockchain.
Real estate buyers who are sitting on heaps of distressed properties in the real world are pushing up the value of virtual lands, where there are no confinements, curfews, or other limitations to visitors entering the shops, clubs, and casinos. Since January, the average price of virtual land has jumped from 192 USD to over 1,300 USD, peaking at 3,500 USD 10 days ago.
Until recently, only gamers hung out in these virtual spaces controlled by the game owners. The big difference and investment opportunity is that virtual lands on the blockchain are built and owned by the users who use the virtual world currencies to buy and sell virtual land plots and in-world goods and services.
Let’s take a quick virtual tour of prime real estate currently selling in virtual lands.
In the global virtual lands market, the top-selling digital asset is land parcels sold by Decentraland. That’s not surprising since the real American dream is to be a real estate mogul like Donald Trump and own buildings. Before virtual worlds were built on the blockchain, a vibrant market in 3D digital cars, characters, buildings, and other digital assets developed in online gaming. With price not a big issue, most sold for under $100, what did people desire? Above even Lamborghinis and spaceships, people want to buy buildings.
Now you have the chance. Virtual worlds initially sell land through initial land offerings (ILO). A vibrant secondary market has developed on OpenSea.io. lamd sale volume and prices in top-selling virtual lands Somnium Space, Decentraland, The Sandbox and Cryptovoxels are soaring.
All time trading volume in virtual land assets is 200,902 ETH ($337.5 million USD), 79 percent of which involved Decentraland assets, the oldest virtual world. Land sales from The Sandbox are number five in recent trading volume, remarkable since the virtual gaming land is only now opening, followed by Axie Infinity (7) and Decentraland (8).
Across virtual lands everywhere, retail space, office buildings, clubs, and other virtual retail estate is rising.
In Decentraland (MANA), 90,000 10 x 10 (an increase to 16 x 16 is currently being voted on by the community) land parcels make up Genesis City, home to social clubs, concerts, retail shops, games, and more. The average land price in Decentraland is 16.6 ETH. Land sales opening: 2018
The Sandbox (SAND) open gaming metaverse is selling 123,840 LANDS (74%) of 166,464 LANDS (96 x 96 meters). Following four sold out LAND pre-sales, the first record-breaking public sale in February will be followed by a wave of LAND sales until 2022. The average LAND sale price in The Sandbox is 0.48 ETH. Land sales opening: 2021. The NFT Marketplace for game assets officially opened March 30th.
Land sales opening: 2017
CryptoVoxels (COLR), a popular virtual art world, lists 761 lands, 20 of which are currently on sale. Sixty percent of all lands are galleries. The average land sale price in CryptoVoxels is 2 ETH. Land sales opening: 2018
Disappearing into a fantasy gaming world used to be about escapism, now you can take part in diverse investment opportunities and become an owner. To get a foothold in virtual real estate, the first step is buying your land (see virtual land sales above). Once you own land, you can make money from your real estate in various ways.
Scarcity, Growing Demand and Price Appreciation
Virtual land values benefit from scarcity. In all virtual lands, a limited number of land plots are available. Scarcity ensures price appreciation. While non-fungible tokens (NFTs) preserve value.
Twenty five percent of NFT sales involve metaverse assets, most of which are land. For the real estate investor, NFTs add value in numerous ways, including:
Preserving value, since NFTs are impossible to duplicate on the digital ledger and can represent scarcity, originality and other unique features.
Fractionalizing real estate ownership, giving all investors an ‘in’ to higher valued real estate deals.
Serving as collateral. Lenders are starting to accept NFTs as collateral for real estate and other digital assets.
As professional investors enter the market, asset values are expected to increase. Republic Real Estate is the first NFT fund to invest in virtual real estate. The fund is focusing on virtual hotels and seeking out undervalued assets in The Sandbox, Cryptovoxels, Somnium Space, Axie Infinity, and Decentraland.
No one looks at the local event listings these days to see what's going on. Concert halls and clubs are closed. On Friday night, more people are hanging out in Reddit chats to find out what’s happening in Decentraland — virtual concerts, casinos and clubs are popular. If you own a popular club, you can rent it out to budding and famous stars alike and sell event tickets. Or develop other diverse experiences such as virtual skate parks, science museums, and so on.
Catering to the growing demand from game characters and avatars looking for hoodies and sneakers, Adidas, Nike and Gucci are brands already making millions selling digital goods as NFTs from virtual storefronts. These digital sales boost brand recognition and real world sales.
Like in any real estate market, investors need to think strategically. Depending on the use purpose of your land, it could be valued differently in different virtual worlds. In Somnium Space, an XL waterfront land sold for 250 ETH (444,270 USD) two weeks ago. We can only speculate about the identity of the buyer WCB2, who owns several dozen XL estates, but a virtual reality cricket game goes by the same name.
Lands located in the Times Square of virtual worlds with high traffic can get top dollar selling advertising space on buildings. The most expensive land sale in Decentraland, also the highest land sale ever, was a parcel adjacent to Fashion Street selling for 2,72,000 MANA (210.7 million USD) in 2018. In some virtual lands, investors can also buy the teleports to ensure they are in a high traffic area. In virtual worlds, no matter where you are located, you have the opportunity to drive traffic to your experience through digital marketing.
When property prices rise in the Trump empire, Donald Trump and his partners reap the profits. When real estate prices rise in Somnium Space or The Sandbox, not only property owners benefit but also all participants in the community who hold the native platform token — CUBE or SAND, for example. Most digital economies create scarcity by only minting a fixed number of tokens to ensure the price rises over time.
In virtual worlds, wanna-be real estate barons have their big chance to own buildings. This new economic sector is giving an important economic boost to the real world. One day soon, you will be able to use your virtual world real estate assets as collateral for real estate loans for bricks-and-mortar buildings. For the first time ever, the real estate and economic recovery could start in the virtual world.
Disclaimer: Nothing in this article constitutes professional investment advice. The opinions here belong to the author alone. Please make sure to conduct your own thorough research before making any purchase.
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