The Other Land Boom
In today’s Money Morning…a virtual island for the price of a real home…pioneers in a digital world…it could be highly rewarding in the future…and more…
Yesterday, we looked at why land was and will likely continue to be an in-demand asset.
Our resident property experts — Callum and Catherine — have outlined how and why a long-standing cycle is set to keep prices high for some time to come. It’s something that all investors will need to stay aware of, not only to preserve wealth, but also potentially grow it!
Today, though, I want to talk about another land rush…
One that is quite different to the local property market many investors know and love.
I’m talking about virtual land. Real estate that is designed, developed, and sold in digital realities. Or, as most pundits are referring to it nowadays: the metaverse.
I know, I know — virtual land sounds like a ridiculous idea. I had my doubts at first too. After all, a lot of physical land’s value comes from the fact that it is scarce. In a digital setting, though, scarcity is much harder to define.
But that hasn’t stopped people from piling into this new trendy asset.
A virtual island for the price of a real home
To show you just how crazy this virtual land boom is, you simply need to look at the prices. Because if you thought Aussie homes have gone up in value a lot, then you might be in for a shock.
As CNBC recently reported:
‘Yorio tells CNBC her company sold 100 virtual private islands last year for $15,000 each. “Today, they’re selling for about $300,000 each, which is coincidentally the same as the average home price in America.”’
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Even I struggle to understand how someone could justify spending that much money on a digital island. We’re all going to have to get used to it, though, because this may just be the start.
Several digital real estate companies told CNCB that they’ve spent millions on different plots of virtual land — investments that have already gone up in price by 400–500% in just the last few months!
Suffice to say, it genuinely seems like the latest get-rich-quick scheme.
And if you’re wondering how all of these transactions are handled and managed, I can tell you that a lot of it is possible thanks to crypto. Because without the blockchain’s ability to prevent double spending and tokenise digital asset ownership, none of this would likely be possible.
As for whether or not this investment space is sustainable, your guess is as good as mine.
It certainly wouldn’t be surprising if it all came crashing down very quickly — as many trends have done when it comes to crypto-related investments.
However, I do think virtual land is here to stay, even if the prices may be grossly overvalued right now.
Pioneers in a digital world
See, despite the silly name, the metaverse is definitely an exciting technology: a digital world that offers up the potential for new experiences and possibilities for people across all walks of life.
Right now, in its relative infancy, we’re seeing virtual events prove to be an early success. Many popular performers, for instance, have conducted digital concerts. It’s a way for people from all around the world to congregate and enjoy their favourite music in a collective environment.
This is simply the tip of the iceberg, though.
In time, we can expect more events — both old and new — to become part of the metaverse. It’s a trend that will cultivate an entire digital ecosystem and reality in parallel to our real one.
And while that may sound a little scary, or even dystopian, it will be popular. More importantly, as an investor, it will most likely be extremely profitable too.
Does that mean you should go out and buy a digital piece of land for yourself right now?
Unless you’re prepared to lose all that money, you’d probably be better off putting money into physical property. After all, as we’ve been emphasising all week, Aussie land value may be about to enter one last melt-up. Again, check out Callum and Catherine’s advice for more details.
In the meantime, though, keep an eye on the metaverse and all its happenings too.
Because despite the fads and the bubbles, the real value of a digital reality is steadily unfolding. And even if it doesn’t make the most sense at times, it could be highly rewarding in the future.
Editor, Money Morning
PS: Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.