What is the Development Status of Virtual Real Estate Platform since 2022

[TL;DR]

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• The metaverse is an interactive environment that mimics the real, physical world using AR, VR, and blockchain technology. Users can communicate, connect, attend meetings and concerts, acquire unique NFTs, and more using their avatars.
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• The average price, trading volume, and total virtual real estate sales fell by 80%, 97%, and 88%, respectively.
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• MetaMetrics predicted that sales on virtual real estate platforms might exceed $1 billion in 2022 after it reached more than $85 million in January 2022.
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• Early in November 2021, the weekly average sale price for virtual real estate on Decentraland peaked at $37,239 but dropped to nearly $10,600 in August 2022.
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• The weekly average sale price for Sandbox peaked in January 2022 at almost $35,000 but was only $3,990 in August.
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• MetaMetrics reported that in October 2021, Facebook declared it would change its name to Meta, indicating a stronger emphasis on the metaverse, thus, spiking up virtual real estate sales to nearly ninefold.
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• Brandessence Research projects the "virtual real estate" industry to increase at a compound annual growth rate of over 31.2% from 2022 to 2028 due to NFT's past stellar success and promising future development potential.
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• Some investors believe that digital real estate will be valuable in the same way physical properties are. They may provide rental income or become scarce resources with a value that increases over time.

The Current Status of Virtual Real Estate Platform Shows Decline in Sales

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In 2021, sales on the four major metaverse real estate platforms reached $501 million; in January this year, the sales topped $85 million. This prompted MetaMetrics Solutions to project that, keeping at this pace, sales could reach $1 billion in 2022. While speculations surrounding the metaverse expanded, the potential for virtual real estate came alive. The six main virtual real estate platforms headed by Decentraland and Sandbox lured a lot of interest from big factories, celebrities, and investors. Everyone wanted to get a portion; even famous singer Lin Junjie couldn't but invest about 123,000 USD to buy three "lands" in Decentraland.

There were many buyers, "land kings" began to appear more regularly, and the market value of "virtual real estate" gradually increased. However, this year, the unexpected happened, and although there seemed to be an infinite number of "land kings" last year, their record abruptly ended in February 2022.


Recent data from WEMETA revealed that the six major virtual real estate platforms had experienced a drastic drop in terms of average price, transaction frequency, and overall transaction volume: from November of last year to early this year, their transaction volume increased from 1 billion USD, and between January and August of this year, the average transaction price dropped from $17,000 per unit to $2,500 per unit, a decline of 85%.

Star organizations and celebrities who once declared high-level virtual real estate purchases are now experiencing losses that are in flux. Among them, the value of the three "land" investments that Lin Junjie made previously has dropped to 3.75 ETH, 3.71 ETH, and 2.5 ETH each, totaling nearly 16,000 USD, with a floating loss up to 86%.

Sales have drastically decreased, and RubyHome reported that the average price of virtual real estate dropped by about 80%, from 16,300 in February to 3,300 in June.

What Caused the Drop?

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Industry analysts claim that the Metaverse is still in its early phases of development, with commercialization, inadequate projections for the virtual real estate, poor user experiences for games built using virtual real estate, and the market collapse as hot spots are moved and liquidity leaves.

In October 2021, Facebook declared it would change to Meta to reflect its growing emphasis on the Metaverse. This action helped give the concept of the Metaverse some credence which led to the surge, as much as 500%, in virtual real estate around November.

But since November last year, when the cryptocurrency market went bearish and cumulatively after the Luna coin fell in May of this year, virtual real estate also took a dip.

Virtual Real Estate; Risky or Not?

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Several businesses and individual investors got attracted to virtual real estate due to the apparent long-term potential of investing in them. However, many hopes have dwindled due to the recent developments in virtual real estate platforms. Some investors still believe the Metaverse is in its infancy and bet that as the Metaverse develops, their real estate investments will be profitable, but some others do not support this investment.

In an interview with CNBC, Janine Yorio, CEO of a virtual real estate development company, warned: "It's highly risky. You should only put in money that you're willing to lose. It's extremely speculative. It's also based on blockchain. And as we know, crypto is highly unstable. But it can also be massively rewarding."

American billionaire Mark Cuban also sprang to public attention two days ago to condemn virtual real estate, stirring a furor among international virtual investing communities. He pointed out: "The worst thing is that people are buying real estate on these sites, which is the dumbest thing ever."

Other investors, unsupportive of virtual real estate, believe that metaverse land is just the most recent cryptocurrency Ponzi scheme, luring unsuspecting investors into ventures that may ultimately turn out to be worthless.

Conversely, a real estate broker, Oren Alexander, gave a seemingly balanced opinion regarding virtual real estate, stating that " the internet world is as essential to some as the actual world. "It doesn't matter what you or I think; what matters is what the future does.

The Metaverse is just in its early phase, and investing in it involves big risks. But given the equally significant likelihood of high profits, it might be worth the risks. However, research must be duly conducted before accepting these risks, just like other investments and business endeavors.

What Is The Future?

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In June this year, major tech companies like Meta, Microsoft, and Epic Games launched the Metaverse Standards Forum (MSF), a group aimed to develop free and open standards for applications in the Metaverse, including AR VR and 3D technology. It would seem sensible to predict that such integration with the prospective metaverse initiatives of other high brands like Sony, and Nvidia, among others, would increase the value and demand for virtual real estate projects.

Meanwhile, as its popularity keeps expanding, the value of the virtual real estate is predicted to rise at a CAGR of 31.2% from 2022 to 2028. A report from BrandEssence Market Research also confirms this prediction.

Bottom Line

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Although the metaverse is predicted to rise exponentially over the coming years, it is still a new field that is far from being stable. It is true that there may be future possibilities for profit, but virtual real estate is still in its infancy. Investing in virtual real estate is highly risky since the future is uncertain, and financial investments in digital assets should be treated with caution. Anyone interested in participating should conduct enough research before venturing into them. If you can't afford to lose an entire investment, virtual real estate is probably not the option. Compared to virtual real estate, most long-term investments typically have more reliable businesses and fewer risks.



Author: Gate.io Observer: M. Olatunji
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