- Last quarter, Q4 2021, sales volume of virtual real estate among the four established virtual worlds (Decentraland, The Sandbox, Cryptovoxels, and Somnium Space) surged, catalyzed by Facebook’s rebrand to Meta.
- Sales volume has cooled off this quarter, Q1 2022, although average price per land parcel remains stable.
- Emerging virtual worlds are continuing to grow and diversify the virtual real estate market. Two projects in particular, NFT Worlds and Worldwide Webb, have grown significantly, making their way into the top four in terms of sales volume.
- As new virtual worlds sell land as a fundraising mechanism, expect sales volume to continue to grow for the virtual real estate sector.
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The virtual real estate (VRE) sector experienced accelerating growth through 2021. The breakout in the fourth quarter was led by virtual worlds The Sandbox and Decentraland, while modest growth was seen in Cryptovoxels and Somnium Space. This quarterly analysis will review overall VRE growth in Q1 2022 in terms of: land sales volume, number of land sales, average land price, and ownership metrics. These metrics are analyzed in aggregate, and by individual virtual world, including two new worlds, Worldwide Webb and NFT Worlds. Next, VRE as an asset class is compared to other digital assets such as $ETH, the native currency of the Ethereum network, using Parcel’s proprietary VRE index. Finally, top land sales of the quarter are highlighted.
Sales volume ($USD)
Although sales volume has decreased -37% across the four original virtual worlds since last quarter (Q4), it is up 104% compared to this time last year (Q1 2021).
Note: Sales = (NFT units sold)*(transaction price in USD)
The following charts break down sales volume by quarter for each individual world.
The chart below shows the year-over-year (YoY) change in sales volume for each world.
The Sandbox stood out with a 285% increase YoY. Against the trending backdrop of the four incumbent virtual worlds, emerging virtual worlds such as Worldwide Webb and NFT Worlds began to gain more traction this quarter.
Since its launch in October 2021, NFT Worlds comprises 31% of virtual land sales. Worldwide Webb is on a similar trajectory. After launching in November 2021, it comprises 13% of virtual land sales. The boost in land sales from these two new virtual worlds, has continued to increase overall land sales by 13% this quarter, bringing total VRE land sales to over $350M ($USD) in Q1 2022.
In terms of relative sales, NFT Worlds and The Sandbox are the leaders, making up over 31% and 39% of total virtual land sales, respectively. Worldwide Webb and Decentraland follow close behind, contributing 13% and 15% of sales, respectively. Cryptovoxels and Somnium Space represent a combined 3% of total land sales in the VRE sector.
The quarter-over-quarter change in sales of each of these virtual worlds highlight how much growth NFT Worlds and Worldwide Webb experienced relative to the original four.
Newly launched virtual worlds typically divide their land up into parcels represented by NFTs. An initial public sale of these land NFTs creates a large amount of sales volume very quickly. Expect this trend to continue as more new virtual worlds emerge and land sales are used as a fundraising mechanism for virtual worlds.
As an investor of virtual real estate, it is important to be cognizant of the number of individual parcels of land traded (i.e. liquidity). This section compares the number of units sold and the average price per parcel for each of the six worlds over the last five quarters. In Q1 of last year, there were about 17,000 units of virtual land traded between Decentraland, The Sandbox, Cryptovoxels, and Somnium Space. This number has since increased to over 28,000 units sold in Q1 2022.
Regarding the number of land units traded per quarter among the six aforementioned virtual worlds, the average price per land parcel is indicated by the red line.
Looking at the previous five quarters, the aggregate number of land parcels sold peaked in Q4 2021. More specifically, land sales peaked in November 2021 for Dencentraland, The Sandbox, and Cryptovoxels. Unit sales peaked in December 2021 for Somnium Space, NFT Worlds, and Worldwide Webb.
As demand increased, so did the average price per parcel in each of these worlds. Average price per parcel peaked one month after the peak in unit sales in Decentraland, The Sandbox, Cryptovoxels, and Somnium Space. However, average price has continued to increase through Q1 of this year in the two younger virtual worlds, Worldwide Webb and NFT Worlds.
This price analysis section begins by examining the quarterly performance of each of the virtual worlds previously discussed, with the addition of $ETH. $ETH is included because it is the cryptocurrency that is used for most digital land transactions (although some land can also be purchased with native currency such as $MANA in Decentraland, $SAND in The Sandbox, and $CUBE in Somnium Space).
As seen in the chart above, 2021 was a profitable year for digital land owners. The Sandbox is the clear outperformer, with a 1,884% increase in price year-over-year (YoY). The YoY percent change in average price is summarized in the table below.
Demand for virtual land surged in Q4 of 2021 and price followed as expected for the virtual worlds Decentraland, The Sandbox, Cryptovoxels, and Somnium Space. The younger projects, Worldwide Webb and NFT Worlds, that were just established in Q4, are off to a fast start in 2022.
Q1 2022 performance
The average price per land parcel increased over the quarter in NFT Worlds (+442%), Worldwide Webb (+173%), Somnium Space (+178%), and Decentraland (+67%). Land prices decreased over the quarter in Cryptovoxels (-17%), and The Sandbox (-12%). The average weekly price per land parcel for the six aforementioned virtual worlds can be seen in the chart below.
It’s important to note that land parcels are divided into different sizes among different virtual worlds. To understand how this impacts pricing, the following chart normalizes average parcel price to meters squared (relative to the size of the in-world avatar). Decentraland is currently the most expensive land per square meter, followed by Cryptovoxels, Somnium Space, The Sandbox, and lastly NFT Worlds.
NFT Worlds stands out because each NFT represents an entire world of 500 km², rather than an individual plot of land within one world like the virtual worlds listed. Note that Worldwide Webb is not listed because units are sold as different apartment types (small, medium, large, and penthouse) rather than as land parcels.
The following chart compares the overall price performance of virtual real estate as an asset compared to other digital assets such as $ETH. For this analysis, Parcel has created a weighted index to track virtual land price, VREI*.
The VREI has a strong positive correlation to the price of $ETH (r=0.71). The VREI is up +146% since one year ago, outperforming $ETH (+106%) by +40%. However, between the end of Q1 2022 and Q4 2021, VREI is down -39% compared to $ETH (-37%).
The graph below compares the percent change in the price of the VREI to $ETH, month-over-month for the past year.
The VREI outperformed $ETH in the last 7 of 12 months, with the greatest price appreciation occuring in August (+95%) and November (+174%) 2021. The average month of VREI overperformance was +45%, while the average month of underperformance was -33%. This price behavior indicates that virtual land is behaving as a higher beta asset compared to $ETH.
This section examines ownership metrics such as total active wallets, unique sellers, unique buyers, new land owners, and cumulative ownership growth. The graph below shows the number of active wallets, unique buyers, and unique sellers combined across Decentraland, The Sandbox, Cryptovoxels, and Somnium Space.
Buyer demand continued to be strong buyer demand in Q1 2022, with 34% more unique buyers than sellers. This indicates that land ownership is continuing to become more diversified among market participants. Total active market wallets have decreased by -45% this quarter compared to last quarter. However, total active market wallets have increased +66% YoY.
The following chart compares unique ownership growth among the six virtual worlds discussed so far.
Unique holders increased for all virtual worlds over the last year. The Sandbox attracted the most unique owners, with over 15,000 unique holders to date. Younger virtual worlds Worldwide Webb and NFT Worlds seem to be on a similar trajectory to The Sandbox, attracting close to 5,000 and 7,000 unique land owners, respectively, in under six months.
This section compares the top three individual sales from this quarter to last quarter. All six of the top sales were Decentraland estates. An estate is formed by merging multiple adjacent land parcels.
|Top three estate sales from Q4 2021:|
|Top three estate sales from Q1 2022:|
On average, the higher the sale price the more land parcels are included in the estate. However, this is not exclusively true as the value of individual parcels can deviate greatly depending on a variety of factors. One key factor impacting an estate’s perceived value is its location: specifically proximity to city centers, roads, plazas, water, landmarks, and points of interest. More information on each estate, including size and location, is found in the following table.
There has been a slight cool off this quarter compared to last quarter in terms of sales volume and average price among the incumbent four virtual worlds (Decentraland, The Sandbox, Cryptovoxels, and Somnium Space). However, newer emerging worlds, such as NFT Worlds and Worldwide Webb, are quickly gaining traction and investment from the community. These worlds provide new investment opportunities that have continued to fuel the growth within the VRE sector over the last year. As more virtual worlds enter the market, the metaverse continues to grow and become more diversified.
This report contains data provided by NonFungible, MetaMetriks, and Parcel’s internal data science team. The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
*VREI currently includes the four virtual worlds, Decentraland, The Sandbox, Cryptovoxels, and Somnium Space. The weighting of each virtual world in the index is based on the previous three months of sales ($USD) of virtual land.