The metaverse is what an estate agent might deem a ‘project’ – a ‘blank canvas’ in an ‘up-and-coming area’. That is to say that the metaverse – an umbrella term that encapsulates everything from virtual and augmented reality to cryptocurrency, non-fungible tokens (NFTs) and digital avatars – is still very much a work in progress.
While it may seem a rather vague and abstract concept at present, that certainly isn’t deterring the growing ranks of speculators purchasing metaverse real estate in the hope that Web 3.0 becomes a digital promised land. But what is a metaverse? How do you buy land in a metaverse? And do you pay stamp duty on digital land? Read on to find out more.
What is the metaverse?
There is no definite metaverse meaning because even the tech world hasn’t yet fully defined how it will work in practice. However, numerous metaverses are vying to become the dominant space like cryptocurrencies before. The best-known are Decentraland, The Sandbox, Somnium Space and CryptoVoxels. Now, investors are rushing to buy virtual land in these metaverses in the hope of potential (but far from guaranteed) profits.
What is metaverse real estate?
Metaverse real estate, also known as ‘un-real estate’, is digital land that can be purchased using the specific currency of that metaverse. Why? Because the overriding belief of tech giants like Google, Apple, Microsoft and Meta (formerly Facebook, perhaps the most visible proponent of the metaverse) is that we will all eventually spend increasing amounts of time shopping, socialising, working and playing in metaverses.
Virtual real estate
The rush to buy metaverse land is founded on the notion that the increasingly digitalised but insular consumers of a post-pandemic world will flock to the metaverse for an immersive, safe and convenient virtual experience. Buoyed by this premise, speculators are now looking to buy land in the metaverse for everything from event spaces to digital storefronts, art galleries and glossy virtual homes as potential investment opportunities.
How to buy land in the Metaverse?
All the major metaverses use blockchain technology to power their metaverse cryptocurrencies. For example, Decentraland’s MANA currency and virtual plots of LAND are based on the Ethereum blockchain. Property investors require a digital wallet to purchase metaverse real estate. When you buy land in a metaverse, you effectively purchase a digital asset, known as a non-fungible token (NFT), with its own unique digital signature.
The metaverse real estate bubble shows no signs of bursting just yet. According to Bankless Times, digital land sales exceeded $730 million in 2021 and could surpass $1 billion in 2022. Forbes reported that the average price for metaverse land in 2021 was around $5,300. However, virtual real estate firm Republic Realm reportedly paid upwards of $900,000 for digital land in the Decentraland metaverse and $4.3 million for metaverse land packets. The latter is being used to develop 100 ‘Fantasy Islands’ on the market-leading Sandbox platform.
Do you pay stamp duty on property in the metaverse?
The short answer is: no. Part of the appeal of metaverse real estate is that buyers do not currently need to pay stamp duty or inform the Land Registry when they make a purchase. Transactions also tend to be immediate, with no complicated chains or paperwork. But, of course, this could well change in the future. The current free-for-all process of buying land in the metaverse could potentially become more regulated as the market matures.
The metaverse real estate market is a rapidly evolving landscape. As with any investment, metaverse investments and NFTs are inherently risky. As some analysts have predicted, the rewards could well be handsome should the industry take off. However, there are no guarantees. At this stage, metaverse developers are selling an idea. That concept is rather speculative, vague, and requires much research, due diligence, and time to develop.
With no stamp duty to pay and potential investment portfolios to be built, with minimal bureaucracy and delays, the appeal of metaverse real estate purchases is obvious, particularly for younger buyers and risk-averse investors. However, until the market for digital land becomes more tangible, bricks and mortar property purchases continue to be the wisest option, and Stamp Duty Land Tax needn’t be an impediment with the right help.
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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.