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Metaverse Virtual Real Estate vs Physical Property: 7 Key Differences

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We are in an era where virtual and physical real estate coexists in the same reality. But what exactly is a virtual property and is it worth investing in? Read one to find out more!

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Virtual realities and metaverse – these two terms are often bandied about these recent years.

Since the onset of the Covid-19 pandemic, we are now very familiar with virtual meetings to replace physical face-to-face ones. Plus, we are introduced to virtual artworks – from to paintings, songs and even tweets in the form of non-fungible tokens (NFTs).

Enter virtual real estate. More than just a 360-degree online tour, this concept is expected to be a game-changer and an evolutionary step in property ownership.

In this article, let us breakdown the two for you and shed some light on what is a virtual real estate, what’s the difference between a virtual and physical property, and how is the present landscape in Malaysia.

What Exactly Is The Metaverse?

Firstly, what is the metaverse? The term – metaverse – became the buzzword in recent years with interests soaring as Facebook announced its corporate name change to “Meta” in Oct 2021 – signifying its intent to venture and expand into virtual reality.

Picture a virtual world where people live, work, shop, play and interact with each other, reminiscent of the life-simulation game, The Sims. All these from the comfort of your own home. This is the metaverse.

What Is Metaverse Virtual Real Estate?

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Metaverse real estate consists of parcels of land in virtual worlds. They can be purchased similarly to how we purchase NFTs – that is, via cryptocurrency.

Upon completion of a transaction, buyers will receive a unique piece of blockchain code (the NFT) that also serves as a deed of ownership.

These virtual real estate properties function beyond just digital images. They are programmable spaces in virtual reality platforms (or metaverses) where people can socialise, game and engage in many other virtual activities.

Similar to its physical counterpart, virtual real estate can be bought, sold and leased. Selling a virtual property is rather straightforward. You simply list the parcel for sale and wait for another buyer to transfer cryptocurrency to your digital wallet in exchange for the NFT.

In November 2021, New York-based Republic Realm spent some US$4 million on virtual land through The Sandbox – one of the few virtual world websites where individuals can purchase virtual land and explore different regions via AR (augmented reality) technology.

Another example of this website/platform is Decentraland – a virtual world in which people can purchase virtual property to build upon and interact with.

Virtual vs Physical Property – 7 Differences You Should Know

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For those considering investing in virtual real estate and physical property, we also provide a comparison of the two types of real estate to help you make more informed decisions.

So, before you invest in a virtual property, here are some differences (as compared to a physical property) to consider.

1) Property usage

Virtual: Metaverse real estate is predominantly focused on retail, recreation and social activities such as virtual concerts – things that are not necessary for life but rather as a form of entertainment.

Physical:  Physical real estate has a much wider range of usage – from dining to sleeping – essentially a shelter over our heads.

READ: 6 ways to sell or rent out your property

2) Volatility

Virtual: Metaverse platforms are still relatively new and blockchain based – with ever fluctuating prices. Ultimately, this means that there is a lack of data to model to help determine virtual real estate value and their future potential, rendering them highly speculative.

Physical: On the other hand, records for real estate dating back to hundreds of years. This traditional form of physical asset many are familiar with are generally more stable due to its relevance. Once again, everyone needs a place to live, work and play.

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3) No central authority

Virtual: Despite an entry made in the blockchain when your purchase an NFT, there is no central governing body to track this form of ownership. The record of ownership of a metaverse real estate is merely stored in a virtual wallet.

Physical: They are highly regulated by statutory authorities and there are also legal provisions against malpractices.

READ: What is the Housing Development Act (HDA) in Malaysia?

4) Geographical limitations

Virtual: The principle of scarcity does not exactly apply here number for metaverse real estate. Although there are still limited lots in any given metaverse platform, the of platforms is almost unlimited. Metaverse real estate can be accessed by anyone from anywhere on Earth. Businesses can easily reach out to the whole world without the need to fork out on physical infrastructure.

Physical: Land is limited and scarce, and properties can only be built based on suitable geographical conditions. In this context, location is key to determining the value of the property.

READ: Property Valuation in Malaysia: What homebuyers and sellers need to know

5) Fewer rules (for now)

Virtual: Virtual real estate is not subject to taxes (at the moment), owners are not required to pay capital gains taxes when selling their property. Additionally, the laws of physics also do not apply here. Hence, the virtual structures are limited to your imagination and creativity based on the size of the virtual lot purchased.

Physical: The complete opposite of virtual real estate where properties are subjected to prevailing taxes and laws.

READ: Real Property Gains Tax (RPGT) in Malaysia & How to calculate it?

6) Streamlined structures

Virtual: No need for bathrooms, fire escapes and the sort for virtual properties. Hence, metaverse event spaces can be streamlined.

Physical: Fire escapes are mandated by law. In terms of event spaces, extra spaces for storage, loading and also bathrooms are necessary to accommodate the large crowds.

READ: 5 ways to reduce your house fire insurance costs (dramatically)

7) Ease of transaction

Virtual: Purchase of a metaverse property usually requires cryptocurrency. A purchase or sale can be made directly by just logging onto a metaverse platform or third-party resellers market.

Physical: There are a lot more steps in purchasing a physical property, involving a great deal of documentation and start-up cost (down payment). As for selling, nearly the same conditions apply. Overall, a longer-term commitment as compared to a virtual property – lesser freedom to buy or sell as and when you like.

READ: Buying a new house in Malaysia: A 12-step guide

Virtual Real Estate In Malaysia

Virtual Real Estate In Malaysia
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In late September 2022, Matrix Concepts Holdings Bhd launched the first-ever property metaverse platform in Malaysia.

As reported by The New Straits Times, Matrix Concepts chief marketing officer Lim Kok Yee said the Matrix Metaverse is a virtual reality universe whereby participants can interact with one another virtually in real-time.

Participants can create their own avatars and converse with anyone in the immersive metaverse via their own device’s microphone and camera – in a fantasy garden wonderland.

The real-time content will also come with strategically placed product posters, videos, kiosks, floor plans and scale-models of Bandar Sri Sendayan – Matrix’s master-planned integrated township.

The developer also has future metaverse expansion plans to introduce lifestyle activities and events such as live concerts, games, property talks and more.

Another prime local example would be the VI-Mall by One VR Malaysia – a 3D shopping mall where shoppers can virtually navigate and immerse themselves in a simulated shopping mall environment to check out products and even purchase them virtually.

A total of 150 ‘shop lots’ were available to be leased (from RM5,000 per month) during its launch.

Should I Buy Land In Metaverse, Or Invest In Physical Property?

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We can expect to see further developments in the metaverse real estate realm in the near future.

Buying and selling physical real estate is generally a sound investment, however with virtual real estate, it could be a gamble. What goes up, may also come down – virtually in this context. Pricing can fluctuate wildly on digital properties, akin to the value of cryptocurrencies in general.

Nevertheless, buyers should exercise caution just like when considering purchasing a real-world physical property.

Still weary of the entire metaverse real estate trend? Check out iProperty’s latest property launches and subsale property listings for the good old classic, tried and tested way of investing in real estate.

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