Buyers are paying hundreds of thousands for digital land within the Metaverse

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It’s no secret that the property market is soaring, but the Covid pandemic is causing another little-known land rush. In fact, some investors are paying millions for real estate — not in New York or Beverly Hills. In fact, the properties do not physically exist here on Earth.

Rather, the country resides online in a series of virtual worlds that tech insiders call the Metaverse. Land prices have risen by as much as 500% in the last few months since Facebook announced it would be embracing virtual reality and even changed its company name to Meta Platforms.

“The Metaverse is the next iteration of social media,” said Andrew Kiguel, CEO of Toronto-based Tokens.com, which invests in Metaverse real estate and non-fungible token-related digital assets.

[Digital real estate] Prices have increased by 400% to 500% in the past few months.

Andrew Kiguel

Tokens.com CEO

“You can go to a carnival, you can go to a music concert, you can go to a museum,” Kiguel said.

In these virtual worlds, real people interact as cartoon characters, so-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 that people will access through virtual reality glasses like Meta’s Oculus.

A recent report by crypto asset manager Grayscale estimates that the digital world could grow into a $1 trillion business in the near future.

Here great artists like Justin Bieber, Ariana Grande and DJ Marshmello appear as their own avatars. Even Paris Hilton threw a New Year’s Eve party on her own virtual island.

Kiguel’s company recently dumped nearly $2.5 million on a piece of land in Decentraland — one of several popular Metaverse worlds. “Prices have gone up 400% to 500% in the last few months,” Kiguel said.

Another hot Metaverse world is the Sandbox, where Janine Yorio’s virtual real estate development company Republic Realm spent a record $4.3 million on a piece of virtual land.

For some, the digital world is just as important as the real world.

ears Alexander

Real estate agent

Yorio tells CNBC that last year her company sold 100 virtual private islands for $15,000 each. “Today, they sell for about $300,000 each, which happens to be the average house price in America,” she said.

A risky investment

“For some, the digital world is just as important as the real world,” Miami-based real estate agent Oren Alexander tells CNBC. “It’s not about what you and I believe in, it’s about what the future holds.”

Just like real estate in the real world, according to Kiguel, the metaverse is about three things: location, location, location.

“When you first go into the Metaverse, there are areas where people congregate — those areas would certainly be a lot more valuable than the areas where events aren’t happening,” Kiguel said.

Surely these high-traffic areas attract big spenders.

“Think of the board game Monopoly. We just bought Boardwalk and the surrounding area,” Kiguel said. “Areas where people congregate are far more valuable for advertisers and retailers to find ways to reach that demographic there.”

For example, Snoop Dogg is building a virtual mansion on a sandbox lot, and someone recently paid $450,000 to be his neighbor.

[It’s] high, high risk. You should only invest capital that you are willing to lose.

Janine Yorio

CEO of the Republic

“I think it absolutely matters who your neighbor is,” Yorio said. “That goes for almost everything, doesn’t it? It’s like a club and you want to be with people who have similar interests.”

Buying virtual land is pretty easy – either directly from the platform or through a developer. Investors till their land and make it interactive. “You can decorate it, you can change it, you can renovate it,” says Yorio. “It’s code.”

But Yorio warns that investing in digital real estate is a risky business.

“[It’s] high, high risk. You should only invest capital that you are willing to lose,” Yorio told CNBC. “It’s highly speculative. It is also blockchain based. And as we all know, crypto is very volatile. But it can also be very rewarding.”

Mark Stapp, professor and director of real estate theory and practice at Arizona State University, agrees. “I wouldn’t put money into it that I wouldn’t care about losing. I certainly wouldn’t do it,” says Stapp. “If things continue as they are, it will most likely be a bubble. You are buying something that is not tied to reality.”

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