VALUATION OUT OF THIS WORLD: PRICING LOCATION IN THE METAVERSE

Abstract

In the current digital age with the growing trend of cryptocurrency, interactive augmented reality (AR) and virtual reality (VR), it is no surprise that the existence of virtual real estate has prevailed (Ackroyd and Utley, 2022). The popularity of the Metaverse and virtual real estate has been rapidly rising, with global businesses like JP Morgan, HSBC and Samsung purchasing virtual real estate (Marr, 2022). Despite its rising prevalence, the Metaverse remains as a foreign concept to many and is lacking research (Blackbox, 2023). This study thus covers three objectives: Firstly, the report seeks to unpack the concept of Metaverse and its virtual real estate. Secondly, this dissertation will cover the virtual real estate market fundamentals and identify asset management opportunities for real estate players. Lastly, understanding that physical real estate is about ‘location, location, location’, this report will also investigate if locationality exists in the Metaverse and if the same real world land pricing and bidding theories like the Alonso-Muth-Mills model apply to virtual real estate, determining whether there is a correlation between distance to the city centre and virtual land prices. Upon analysis, the findings show that there is a strong negative correlation between distance to the Central Business District (CBD) and land prices in the Metaverse, allowing us to conclude that land pricing and bidding theories in the real world apply to virtual real estate as location is related to land prices in the virtual world.