The relevance of the real estate sector in the Metaverse

The recent popularity of the Metaverse in the real estate market is growing and many investors are willing to pay millions to be part of this innovative universe. The Metaverse is a virtual universe where real world interaction is simulated allowing users to work, play, shop and communicate with other people in the same virtual space. With the Metaverse we are one step closer to the digitalization of the real world and the real estate sector is not far behind.

Currently, there are four universes: Decentraland, Sandbox, Cryptovoxels and Somnium Space. Overall, real estate has become the focus of attention for those venturing into the Metaverse after reaching $500 million last year, according to CNBC in early 2022, and according to a report by BranEssence Market Research the real estate market is expected to grow at an annual rate of 31% between 2022 and 2028.

How can this be real? Real estate in the Metaverse has a huge impact on user interaction, and so property is an essential part of the structure of this universe. Users have found two ways to take advantage of the real estate market from: (i) buying land to build a house for the avatar, in other worlds, a home in the virtual universe or; (ii) buying land and/or a property as an investment. The second scenario works purely as a real estate investment in real life, where there are always risks involved in the business.

But then, what would be the benefits and risks of investing in this new scenario? The main risks associated with the acquisition of real estate could start from the fact that the market is currently not so regulated, and investments are quite speculative. The transaction currencies in the Metaverse are cryptocurrencies and NFTS (non fungible tokens), a market that at the same time is not entirely regulated. And finally, although the value has risen exorbitantly over the last year because it is considered that so far, the land in the Metaverse is a finite resource, there is no certainty about the possibility of expanding the universe to the extent of eventually becoming an unlimited resource, and consequently, decrease the value of the properties.

On the other hand, the benefits are significant; not in vain the real estate sector is in a "boom" in the Metaverse, since users who ventured and invested in its beginnings, have already perceived great returns on their investments. At the beginning of 2021 in Decentraland and Sandbox a plot of land was worth approximately $1000 USD, but today it is worth over $13000 USD. In addition, the security of the property is high and the risks inherent to the theft of money when making an investment or the default in the rental fee of a property are null. Additionally, Citi Bank's expectations are that by 2030 the Metaverse economy will be between $8 trillion and $13 trillion dollars, which generates interest and encourages more users to participate in the Metaverse. 

Beyond the innovation and status derived from having "residential" properties in the Metaverse, the truth is that with the economy of this universe, commercial real estate is truly productive, therefore the logic of real estate investment in the real world is closely replicated in the Metaverse. The interaction between the users of the Metaverse is mediated by the infrastructure that is being developed and that is why the value of land is beginning to trend significantly upwards and is therefore highlighted as a promising industry.

In conclusion, the Metaverse is a universe that is under the process of development and in constant evolution, which is generating a lot of uncertainty in various areas within which the real estate sector deserves special attention. Mark Zuckerberg, the founder, and CEO of Meta is betting billions of dollars every year so that this virtual world, digital avatars and real estate become almost synonymous with real life. Will investments in Metaverse real estate sector eventually be considered common?