Spending Real Money On Virtual Property In The Metaverse

Metaverse and its impact on the property market.

Spending Real Money On Virtual Property In The Metaverse
Photo by Alex D'Alessio on Unsplash

Facebook renamed itself, Meta, in November. That has caused a tsunami of money to flow into the metaverse as investors snap up virtual real estate — hoping its value will soar. 

Within days, metaverse property developer Republic Realm handed over MYR18.2 million (US$4.3 million) to a seller of digital land in the virtual world called Sandbox.

Become a real millionaire developing virtual real estate

People have bought virtual land in virtual worlds for nearly two decades. Worlds and games like Entropia Universe, Mirandus, Sandbox, and Decentraland have all offered this capability in some way. Virtual worlds may exist entirely online, but they work just like a real-world real estate market. 

Probably, the first person to mint a real-world fortune from virtual real estate was a former schoolteacher and virtual real estate developer named Ailin Graef.

Back in 2005, the Chinese-born German invested MYR42 (US$9.95) on real estate in the game world of SecondLife. Within a year, her virtual property empire had grown enough to turn her into a real-life US-dollar millionaire. Unfortunately, much of her fortune disappeared when SecondLifes popularity plummeted and demand for property in the world evaporated.

Like real property, virtual real estate is made more valuable by a good location near desirable neighbours and amenities. And once you own your land, you can develop it into an income-producing property, such as a hall for hosting virtual concerts or an online shopping mall whose retailers pay you to rent. You can also on-sell your property to others — hopefully, at a profit.

Buy Virtual Copies of Kuala Lumpur Landmarks

The virtual world called Next Earth goes even further. Virtual land in this digital world is equivalent to specific parcels of real-world property. And Malaysians are among the big buyers.

One such buyer, according to a recent media report, is Leo Tan. He purchased the virtual land for MYR486 (US$115), where, in the real world, the Tun Razak Exchange sits. Another investor acquired the virtual equivalent of the land under The Exchange 106. 

Individual investors could never own this property in the real world. In the virtual world, they can.

Prices are rising

Prices for virtual land are rising, and it is no longer just metaverse aficionados buying. The MYR18.2 million buyer I mentioned above is partnering with well-known videogame company Atari SA to develop some of its virtual properties.

Another recent land buyer is Canadian investment firm Tokens.com Corp., which has paid around MYR10.6 million (US$2.5 million) for a tract in the Fashion District of virtual world Decentraland. 

According to the Decentraland marketplace, the largest estate that is now for sale in that virtual world costs the equivalent of MYR90.4 million (US$21.4 million). The cheapest single parcel now for sale is listed for about MYR61,000 (US$14,500).

Thats not cheap, but some buyers in cities where regular homes are unaffordable find that developing or speculating in virtual property is more appealing simply because it is more affordable than real-world real estate.  

Boosters say that buying virtual land in virtual worlds that are young and quickly growing is similar to investing in empty real-world land on a site destined for development. 

Both the public and big multinationals have turned their attention to the metaverse. Meta has announced an MYR42 billion USD 10 billion fund to invest in related technologies. 

Nvidia, Microsoft, and Roblox also see the metaverse as the future of digital interaction. With many more tech giants expected to follow these leaders, humanity’s vision of reality may soon encompass both the physical world and the 3D, digital metaverse.

Would I consider buying virtual land as an investment strategy? It is the space that I will certainly follow closely. Perhaps one day, I will put money where my mouth is. 

The metaverse offers a lot of excitement and potential. But virtual real estate is still highly speculative and can be volatile. It is not for faint-hearted investors.

By Daniel Ho, Co-Founder and Group Managing Director of Juwai IQI