TL;DR

A metaverse property is an NFT that provides the holder with digital proof of ownership of land on a metaverse platform. The land can, in most cases, be built on to create experiences focused on advertising, socializing, marketing, entertainment and more. The value of each land depends on these factors, as well as general market sentiment, collectability, and platform popularity.

Introduction

The concept of metaverse and the digital real estate market go hand in hand. But like many trends in the crypto sector, media coverage has not provided enough clarity. As with any other investment, it is essential to understand the concept of the real estate metaverse before purchasing any digital land. Compared to purely artistic non-fungible tokens (NFTs), the real estate metaverse is simpler to understand due to its practical utility and use cases.

How does the real estate market exist in the metaverse?

For those unfamiliar with the metaverse, the term digital real estate may sound like a paradox. The real estate sector is completely linked to the idea of ​​physical property. However, although blockchain-based real estate in the metaverse is not physical property, it offers the same — or perhaps even more — property rights over (digital) land. Ownership of land in a game, community, or other platform is represented by an NFT.

Because NFTs are non-fungible (i.e., each one is unique) and can securely prove digital ownership, they act as title deeds for digital real estate. It is possible to trade, buy and sell an NFT according to its market value, which is derived from a series of factors.

Your metaverse property may be in a popular area with a lot of digital traffic, making it suitable as an advertising space. Staking benefits and other utilities also add value to a piece of land. The specific metaverse platform will determine the value of your land.

Some metaverse platforms offer a considerable degree of customization, where you can build and plan your own space, events and experiences. Examples include The Snoopverse on The Sandbox and Netflix content on Decentraland.

The appeal of metaverse real estate

To understand the appeal of metaverse real estate, it's worth taking a step back and analyzing the attractiveness of NFTs as a whole. On a technological level, NFTs provide legitimate digital proof of ownership. This is a valuable skill in a world where it is very easy to copy and replicate files without noticeable differences.

Next, we need to evaluate the collectability aspect. Human beings have always been passionate about collectibles, for several reasons. In addition to fun and collectability, an NFT provides tangible benefits, such as useful functions in a game or on a platform.

Another attraction of NFTs is their investment potential, which is why many people hold them as a speculative strategy. During strong trending markets, NFT prices often follow the upward price trend. The so-called NFT bull runs were also, in some ways, the result of celebrity influence and media hype about the technology.

Many people buy land NFTs in the metaverse because they follow all the principles mentioned above. JPMorgan, for example, purchased land on Decentraland to:

1. Utility: They can host virtual guests at their property at The Sandbox and create an immersive experience.

2. Collectability: Metaverse real estate is a part of popular culture with a high degree of collectability, which can be very useful for marketing activities.

3. Property and speculation: It is unlikely that JPMorgan would have purchased land without thinking about the possibility of selling it at a profit or increasing its revenue through customer acquisition.

What can you do with metaverse properties?

Virtual ownership is limited only by the boundaries of the metaverse. Therefore, this idea has great potential to transform our social and professional lives. In addition to its use in investments and trading, this potential will drive the adoption of the technology in the long term. Any implementation of the metaverse can also be experienced through the metaverse's digital real estate. The use cases and specifics will depend on each platform, but, theoretically, the sky is the limit.

Individual users, artists, creators and brands can design their own experiences based on what their properties offer. Concerts, meetings, fairs, art exhibitions and brand launches have already taken place in digital areas. This makes metaverse real estate an incredibly important tool in socialization and marketing. Some big brands are experimenting with this format, including:

1. HSBC: Purchased land in The Sandbox in the first quarter of 2022 with the plan to create new experiences.

2. Samsung: Created a virtual experience called Samsung 837X on Decentraland and hosted events like the#RecycleUpFashion Show.

3. The South China Morning Post: Developed a digital version of the Hong Kong Star Ferry Pier at The Sandbox.

The growth of the metaverse real estate market

A growing number of followers and increasing sales of metaverse real estate have caught the attention of media, the public and investors around the world. According to data from Influencer Marketing Hub, "the average price of a lot on the main metaverse platforms increased from US$1,265 to US$12,684", which represents a tenfold increase from January 2021 to February 2022. McKinsey reports a "flow of more than $120 billion into the metaverse space in 2022 — more than double the $57 billion in 2021."

For such a young industry, the numbers are surprising. However, rapid market capitalization growth is not necessarily related to longevity or a healthy market. We will probably have to wait for this hypergrowth phase to define the real value of land in the metaverse. Some early investors have already benefited from the growth of the metaverse. For example, land next door to Snoop Dogg's property was sold for nearly half a million dollars.

What affects NFT virtual land prices?

We've briefly described the appeal of NFT virtual land, but let's delve deeper into the three main factors that determine their price:

1. Utility: Each platform, game or universe in the metaverse has a defined utility for its virtual lands. Some allow a high level of customization, while others provide benefits or attribute enhancements in games. If your NFT virtual land has a particularly desirable utility, it is likely to have a higher value on the open market.

2. Platform: As mentioned above, the usefulness of your land will depend on the platform on which it is located. Furthermore, the brand and reputation of a platform also influence the value of your NFT land. This is similar, for example, to Nike or Adidas charging considerably more than a lesser-known brand for a product of very similar quality.

3. Speculation: The idea that a metaverse property may be more valuable in the future is often enough to affect its price. If the entire market shares this sentiment and is optimistic about the price of metaverse land, speculation becomes a significant factor in determining price.

Final considerations

The long-term adoption and acceptance of metaverse real estate goes beyond the hype: to be successful, both depend on real use cases and the utility offered. Either way, it's fascinating to see the evolution of the metaverse real estate market in such a short time. The increased popularity of the metaverse and the new and continuous updates in the sector contribute to its maturation. Therefore, becoming familiar with the concept of digital property is a great idea for any user or investor who is interested in the future of the metaverse.