There are now lenders willing to make loans against equity in cryptocurrency or NFTs, like virtual real estate.
These companies are key to opening up the metaverse to more people and changing it forever.
Metaverse real estate stands to become a new rung on the real-world property ladder.
A few companies are offering mortgages against NFTs, like virtual real estate. This could be a game changer for the metaverse as more lenders come online.
If you were lucky enough to get into metaverse real estate in the first half of 2021, you may have only needed a few hundred dollars to purchase the lot of your choice. Boy, how things have changed since then. Although there are certainly still platforms where that's possible, the most popular platforms with buyable land, like Decentraland and The Sandbox, now require thousands of dollars just to buy a small plot of real estate in a residential area.
With price appreciation like that, one of two things was inevitable: Either prices would collapse as interest fell off, or someone would find a way to make a secured loan to encourage more of these purchases. And, since interest in the metaverse seems to only be heating up, what we got was the second thing. A few brave companies are trying out different ways to write loans backed by NFTs, and as this spreads, it's going to catch the metaverse on absolute fire.
I can think of so many ways this will affect virtual real estate next year (and beyond).
1. More interest in metaverse real estate will be generated
Right now, many people are looking at the prices of real estate in the metaverse and wincing, unsure if they're willing to part with so much cash for a piece of real estate they can never visit in the flesh. Despite the absolute rocket-like velocity of value growth, it can feel excessive to put down $15k for a lot in Decentraland, for example.
But a mortgage on an NFT for $15k may feel like a different thing, especially to a curious user or an individual metaverse real estate investor. If you can borrow against your crypto coins or, better yet, your other metaverse holdings, it's going to allow an investor to acquire more and more real estate more quickly, before prices go nuts all over again.
Every day, new people interested in virtual real estate look at what is possible for them, their budgets, and in the worlds they're exploring. These mortgages would give them an easier path to ownership now that their journey has already brought them this far. They'll tell their friends and grow the virtual world simply by having experiences that are unique to the virtual world.
2. The more people buy into the metaverse, the faster it will grow
Just like having more affordable and attainable mortgage lending leads to higher rates of homeownership, being able to finance metaverse real estate is another way to stimulate interest in the metaverse itself. Ownership creates community, even if that ownership is because of a loan that has monthly payments due. In a place like the metaverse, creating a community can mean almost anything, but there's one thing that it definitely means: growth. How does that work for you? And that's great because the metaverse is far more than just a series of games; it's a whole new environment for people to have new experiences and meet new people.
When people invest in neighbourhoods -- both online and off -- they attract more people who have similar interests and desires, and the whole neighbourhood elevates in value, desirability, and amenities. Unlike the real world, there's a lot less to worry about with things like crime in the metaverse, but it is possible for a neighbourhood to go into decline from disinterest all the same.
3. Younger players can get on the real-world property ladder
Stay with me here, I know this sounds wild. But there are a whole bunch of people who can't afford to buy physical real estate, which is a very bad thing for them, since they seem to want all the commitment that entails very badly. Not being able to buy physical property also means they're not benefiting from the equity gains that tend to be natural for much of the real-world real estate market.
However, if they can buy something more attainable that also gains equity, like a virtual house, or even a metaverse shopping centre, well, now they've got something. These are people who are already spending their off time in a virtual world of some kind -- they might as well buy into one and watch their money grow.
There's a certain pride of ownership that comes with owning real estate, real or otherwise, and eventually this should become an asset class that can help these people move up on the real-world property ladder. Instead of a small two-bedroom starter home, the property ladder could potentially start with a small residential lot in a virtual world, giving younger people something they can invest in and sell for real-world money, leading to more routes to real-world real estate ownership over time.