You can build on it, rent it out, and sell it.
I’m talking about land, except, not the tangible stuff.
Digital land, the stuff of the metaverse.
In case you’ve had your head blissfully away from the internet for a few months, the metaverse is apparently going to be the virtual playground where humans get to spend all their waking moments in the not-so-distant future.
According to the digital monopolists, it will supersede the internet.
With the help of VR headsets, you can attend work events, travel, visit entertainment facilities, go on a date…all without washing your hair or moving from the sofa.
Personally, I think it sounds like some kind of transhuman hell.
Still, if you presume increasing numbers will be using the metaverse to shop, work, and play, that means that the location of the digital land in the metaverse could potentially yield a significant economic rent.
For the uninitiated, economic *land* rent is the free lunch you’re gifted when your plot of land rises in value through no work or enterprise of your own.
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Rather, it shoots up in value due to improved facilities and community activity, as more buyers chase the prime spots available.
It’s why the classical economists quipped that ‘owners grow rich in their sleep’.
Today they call it ‘capital growth’.
Except capital doesn’t ‘grow’.
It depreciates with wear and tear — the buildings sitting on the land being a prime example.
It’s the locational value of the land that becomes more valuable — as any savvy real estate investor knows.
But back to the digital stuff. In the past week, land worth more than US$100 million has sold on the four largest metaverse sites:
- The Sandbox
- Somnium Space
Tokens.com has bought a prime patch in Decentraland’s Fashion Street district.
The platform wants to use it to sell luxury brands.
Tokens.com CEO Andrew Kiguel (who has spent 20 years as an investment banker specialising in real estate) stated:
‘If I hadn’t done the research and understood that this is valuable property, it would seem absolutely crazy.’
Apparently, a virtual Gucci handbag sold on the Roblox platform recently for more than the real one costs!
Seems you have to pay a hefty sum to make your avatar look good.
Kiguel hopes Fashion Street will become a shopping destination akin to New York’s Fifth Avenue…or maybe Chadstone for the Aussies?
For now, speculation is going to feed the frenzy — just as it is for other NFTs.
You can’t help but cast back to the similarities of the last digital real estate boom.
That of domain names in the lead up to the dotcom crash.
In the glory days of the domain name game, speculators grabbed domains with brand names and key words to flog off to the highest bidder.
The number of registered domain names reportedly doubled in 1999 and tripled in 2000.
In the years following the collapse, names that had transacted for millions, couldn’t be sold for peanuts.
We’ll no doubt see a similar repeat at the end of this speculative cycle.
For now, however, a lot of the wealth is being created in the digital landscape and I’ll guarantee, much of it is going to find its way into real land.
After all, at some point, you must take off your VR goggles.
According to the AFR last week, more than a few first home buyers are swinging their NFT profits into a savings account for a house.
This from Tom Hayes, a 21-year-old finance student at RMIT who’s selling NFTs:
‘“It’s definitely going to help buy a house,” Hayes says. “A lot more than just working in a fruit shop and investing in the ASX which is what I was doing before.”’
I’ve come across a few investors myself in recent months who have bumped up their budgets investing in all things blockchain.
If you understand the land cycle, you can advantage from both the real land boom, and the digital land boom.
The key is knowing the time to get in, and more importantly, the time to get out.
Catherine Cashmore, Editor, The Daily Reckoning Australia
PS: Australian real estate expert, Catherine Cashmore, reveals why she thinks we could see the biggest property boom of our lifetimes — over the next five years. Click here to learn more.