Real Estate NFT: Are NFTs Shaping the Future of Real Estate? (2024)

Real Estate NFT: Are NFTs Shaping the Future of Real Estate? (1)

As technology evolves alongside society, nearly all aspects of life increasingly shift to the virtual space. From work and school to conferences and social gatherings — even to group fitness classes and weddings — we can do all of these things from the comfort of our homes through computers, smartphones, and tablets. But a surprising addition to that list is buying NFT real estate properties.

You’ve probably heard of NFTs and know that it stands for “non-fungible tokens.” And you probably already know that NFTs have disrupted the digital art scene, particularly in early- to mid-2021. But you might be shocked to hear that you can also buy blockchain properties that are only available in the digital world.

That’s not all: Some NFT properties come with actual, real-life buildings. And these digital buildings are significantly influencing the design and construction of real-life properties.

Read on to learn more about this virtual real estate phenomenon, how it’s changing the real estate industry, and what you can do now to prepare for this disruption.

This post covers:

  • What is this virtual real estate trend?
  • Virtual real estate vs. physical real estate
  • How the virtual world is influencing the real world
  • What does all this mean for you?

The virtual NFT real estate phenomenon

Back in late 2020, a digital artwork — Mars House by Krista Kim — sold for over $500k during a Sotheby’s auction. It was dubbed as the “first NFT digital house” ever to be sold. But that’s not the only hot virtual real estate – more commonly known as metaverses– on the market.

According to the NFT tracking site NonFungible.com, a plot on Decentraland sold for $283,567, and a Sommium Space estate for over $500k. In these metaverses, people go to casinos and hit up hip downtown spots with friends – the exact way you’d do in real life.

There are different types of metaverses that attract different groups of people. The metaverses with the most content — like shopping malls and museums — bring in the most digital “foot traffic.” Think about how in real life, younger folks tend to like urban cities while families gravitate toward suburbs. It’s the same logic behind these virtual worlds!

Real Estate NFT: Are NFTs Shaping the Future of Real Estate? (2)

Longing for connection from afar

In 2020, when the Covid-19 pandemic forced the outside world to close down, people struggled with newfound isolation. So, it’s no surprise that people turned to these metaverses to socialize and pass the time. Just like gamers increasingly turned to video and online gaming as a social lifeline, tech junkies and real estate enthusiasts sought solace by investing and engaging in these digital worlds.

Krista Kim even opened the Mars House to the public by organizing virtual tours of the digital property. For five days in June 2021, she partnered with Spartial, a virtual reality platform, to host 45-minute self-guided tours of the house for $200 per ticket. There’s also an option for people to “rent” the Mars House for weddings and other virtual private events.

It all started with blockchain and cryptocurrency

The concept of blockchain and cryptocurrency was introduced to the public in 2008. Cryptocurrency – like Bitcoin and Dogecoin – is digital money that lives on the blockchain, a virtual ledger system. Real currency, like US dollars and Euros, is exchanged into cryptocurrency; each cryptocurrency has a different exchange rate, similar to international currency exchange rates.

Just like how people adopted mobile devices at an exponential rate over the past 20 years, we see a similar trend with blockchain technology and cryptocurrency. Many blockchain technologies provide a way to safely encrypt and protect transactions that occur online. And as people become increasingly dependent on the Internet of Things (IoT) devices as a way of life, blockchain technology will continue to grow and become mainstream.

Examples of devices on the IoT now:

  • IP apartment intercoms
  • Smartphones and smartwatches
  • Vending machines
  • HVAC systems

So, it’s no surprise that the new trend in the digital space is buying and investing in virtual real estate. Think back to when social media platforms first started to emerge. There was skepticism about the platforms’ success and longevity, many declaring it was just a fad. Look at where those social networks are at now. The same boom could happen to metaverses and other digital real estate properties.

Virtual real estate vs. physical real estate

Virtual real estate isn’t that different from physical real estate – except for the fact that you can’t “physically” live in a house on the metaverse. In virtual worlds such as Decentraland, people engage in the same activities as they would in real life. For example, they decorate their homes with artwork, walk around with friends, visit art galleries and museums, and attend events. People have avatars that closely resemble their real-life selves — sometimes a bit more enhanced.

If you understand real estate, you’ll understand the investment approach for the virtual version as well. Just like how you’d want to have a diverse investment portfolio for real-world real estate, the same is true for metaverse properties. Even in its nascent stages, virtual real estate is becoming a comparable asset class to traditional real estate.

Watch how ButterflyMX works:

Real-life and virtual properties are shockingly similar

Currently, the most popular properties in metaverses are in downtown districts. The more content a metaverse has, the busier it is and the more it’s worth. The same concept of how real estate in major metropolitan areas like New York City and Los Angeles is much pricier than surrounding suburbs can also be applied to digital real estate. And so, developers of these virtual spaces are paying close attention to the architecture and personality of each virtual city.

Finally, both types of real estate share a major thing in common: scarcity. Each metaverse has a limited number of “parcels,” which are basically like acres of land but in the NFT sphere. That’s why the popular metaverses come with a hefty price tag — they’re a hot commodity, but there aren’t enough for everyone who wants them. Surprising to most, a handful of the pricier virtual properties come with mortgages with interest rates.

That’s not all:

Owners can “rent” out their virtual homes to tenants. The only difference is that, in metaverses, these financial decisions are based on decentralized finance (DeFi) software, which is blockchain-based financial programs that use automated workflows to help consumers make smart money decisions.

Merging the two worlds

Virtual and real-life properties are so similar that there was an incident of an NFT coming with an actual house. Californian real estate agent Shane Dulgeroff bought and renovated a duplex and then got a graphic artist to make a digitalized replica of it that turned into an NFT. The person who purchased the NFT also got the house that inspired the artwork.

“It’s less about the significance of the art as it is the significance of us using a platform like this to sell a home. The significance that the art will carry, it’s going to be stored in your digital wallet forever as living proof that you purchased the first home ever that was done through any kind of a crypto platform directly. So that’s where the real value is.”

— Shane Dulgeroff

An advantage for virtual real estate

Virtual worlds have another – perhaps more significant – advantage than just being a platform for friends (and foes) to come together from anywhere in the world under any circ*mstances.

Although no one can physically “be in” these spaces, a huge advantage that metaverses have over physical spaces is that they can reach far more people. This is a game-changer for advertisers and large corporations to market their goods and services to demographics they’d usually miss.

For example, IKEA Taiwan recreated its catalog in-game to capitalize on the in-game furniture hype. This provided a link between IKEA-themed islands in video games to its own platform and store, grabbing customers who otherwise wouldn’t be interested in buying its furniture in real life.

And since the work-from-home revolution that started in 2020 will be permanent, people may depend more and more on these virtual spaces as their main method for socializing. Additionally, millennials and younger generations grew up with online shopping and purchasing virtual goods, so the metaverse trend might evolve naturally from those habits. Although it costs up to hundreds of thousands of dollars to own a property on these metaverses, anyone with internet access can enter the platforms. This further widens the audience for marketers.

How the virtual world is influencing the real world

One of the major trends the Covid-19 pandemic introduced to the real estate market is virtual tours. Since it was unsafe to meet in person, property owners allowed prospective buyers and renters to tour listings online from the comfort and safety of their homes.

But what if the hike in the metaverse trend opens doors to even more opportunities? Architects already use graphic design software to create realistic renderings of new constructions.

These metaverses could give real estate developers and architects real-time insights on which building designs and amenities tenants really want. In a sense, virtual spaces can act as crowdsourced renderings of real estate properties that could eventually exist in the real world. And without zoning rules in crypto-spaces (yet), consumers’ imaginations roam freely, which can spark a wide range of inspiration for real-life real estate.

This NFT real estate hype might prove to be much more than a fad; it could potentially revolutionize real estate for years to come. Having people live in these metaverses can help marry the high-tech revolution with high-touch personalization. As of now, a select few can design their “dream homes” from scratch, but what if these metaverses could make such a dream more accessible and attainable for the masses?

Real Estate NFT: Are NFTs Shaping the Future of Real Estate? (4)

What does all this mean for you?

Regardless of where you stand with this NFT real estate craze, one thing is certain: Technology is driving the future of the real estate industry. As you may know, real estate is one of the longest-standing industries, and it’s not going anywhere anytime soon. As long as humans are inhabiting the world, there will be a need for real estate.

To keep up with our technology-dependent society, it’s time to start investing in property technology (proptech). Investing in proptech will help your property adapt more quickly to the increasingly tech-forward future.

Real Estate NFT: Are NFTs Shaping the Future of Real Estate? (5)

Invest in proptech to be future-proof

The biggest benefit of technology – especially cloud-based technology – is its ability to integrate with each other. Proptech devices like smart locks and video intercoms are already internet-connected. And most resident and property information can easily be transferred onto a secure blockchain, the software that NFTs live on. So, installing proptech throughout your property will put you ahead of the competition.

In the near future, all proptech devices and property management systems will be integrated and operate under the umbrella of one database. Although seemingly far-fetched now, there might be a day when you can modify your live-in home with a few clicks on the metaverse – anything’s possible! Embrace the future by adapting all the features and automation that proptech can bring to your building.

Real Estate NFT: Are NFTs Shaping the Future of Real Estate? (2024)

FAQs

Real Estate NFT: Are NFTs Shaping the Future of Real Estate? ›

As blockchain technology continues to mature and regulatory frameworks evolve, fractional NFTs are poised to reshape the future of real estate by enabling greater inclusivity, transparency, and efficiency in property transactions.

What is the point of NFT real estate? ›

NFTs aim to revolutionize real estate by enabling property tokenization, offering enhanced global liquidity, and facilitating fractional ownership. The blockchain foundation of NFTs ensures secure, transparent, and expedited real estate transactions, minimizing traditional procedural hassles.

Is there a real future for NFTs? ›

But NFTs are still showing signs of life and interest from businesses and consumers. High-value brands, including the Premier League, Louis Vuitton and McDonald's, announced plans for NFTs in 2023. I believe there remains a future in NFTs—and with it, there is an opportunity to evolve.

What is an example of NFT in real estate? ›

What are some examples of NFT Real Estate Projects? Decentraland: This is a virtual world project on the Ethereum Blockchain that allows users to buy, sell and rent digital land parcels represented as an NFT.

Are NFTs worth it in 2024? ›

From my perspective, while there are factors that could encourage NFT adoption, a potential recovery likely won't resemble the 2021 hype, so I don't expect the charts to explode again. Instead of a few collections worth millions, there might be smaller NFT projects with more accessible prices and higher utility.

What is NFT real estate and how is it changing the real estate industry? ›

NFTs are poised to transform the real estate market by enabling tokenization, fractional ownership, increased liquidity, and global accessibility. The ability to buy, sell, and invest in tokenized real estate through NFTs opens up new opportunities for individuals, investors, and the broader market.

What is the difference between NFT and digital real estate? ›

Moreover, NFTs enhance liquidity in the real estate market. Previously, selling a portion of a property would involve complex legal processes. Now, with NFTs, owners can easily trade their digital property tokens on blockchain marketplaces, creating a more dynamic and liquid real estate market.

Is the NFT boom over? ›

That made the sector almost as valuable as the global art market itself. If 2021 was the boom, then 2022 was the bust. In January 2022, the market reached its dizzying height but by September of that year, trading volumes had fallen by a gigantic 97 per cent.

Is the NFT trend over? ›

The trend indicated that NFT popularity was set to continue rising in 2022. From 2021 to 2022, NFTs appeared to be at the forefront of the digital world.

Has the value of NFTs dropped? ›

Has the value of NFTs dropped? Yes, the value of many NFTs has significantly declined following their initial surge. This drop is attributed to various factors, including market saturation, decreased speculative trading, and shifts in the broader economic environment.

Can you buy a house with an NFT? ›

Use of NFTs in mortgages

LoanSnap, using its Bacon Protocol, has offered the first NFT mortgages in the form of home equity loans. They process loans just like regular mortgages but issue NFTs instead of simply creating mortgage notes with the liens.

How do I buy real estate through NFT? ›

How Does NFT Real Estate Work? There is not too much difference between Real estate NFTs and other NFTs. They're purchased using a cryptocurrency of the seller's choosing, held in a digital wallet, and, if speculative, are sold again for a profit to a buyer with the right amount of money.

Can NFT represent property? ›

Because of their characteristics NFTs are ideal for representing valuable tangible assets from the real world including real estate. This idea is groundbreaking because it allows the property to be tokenized and represented as an asset on the blockchain the most secure and decentralized ledger to date.

What is the most expensive NFT in 2024? ›

As of April 2024, the most expensive NFT in the world is The Merge, the NFT collection created by digital artist PAK. The most expensive NFT was sold for $91.8 million.

Can you keep the NFT forever? ›

The good news is that the NFT itself (i.e. the token or certificate of ownership) can never cease to exist. However the file which it is associated with (e.g. digital art, etc.)

What is the most expensive NFT? ›

The Most Expensive NFTs Ever Sold
  1. Merge — US$91.8M.
  2. The First 5000 Days — US$69.3M.
  3. Clock — US$52.7M.
  4. HUMAN ONE — ~US$29M.
  5. CryptoPunk #5822 — US$23.7M.

What is the benefit of having an NFT? ›

The key benefit of non-fungible tokens is the ability to prove ownership. NFTs can make it easier to designate property to a certain fund because they operate on a blockchain network. NFTs have the capacity to develop an open ownership structure.

Why would anyone pay money for an NFT? ›

Why Do People Invest in NFTs? Investors buy and sell NFTs for many reasons. Some are interested in owning the underlying asset. Others may perceive value in tokenizing the asset into an NFT or learning more about cryptocurrency and blockchain technology.

What is the benefit of an NFT? ›

NFTs offer several advantages for digital artists and collectors. First, they enable artists to create and sell unique and scarce digital works, without the risk of duplication or plagiarism. They also allow artists to retain the copyright and royalties of their works, and to set their own prices and terms.

What is the benefit of buying an NFT? ›

Benefits for NFT buyers:

A chance to establish a direct connection with the favorite artists. NFTs change their value over time: it's a good investment, just like cryptocurrencies. Art becomes more accessible than ever before: one can buy a digital picture for an affordable price.

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