Real Estate Could Be Outflanked By Other Investment Assets: Nansen CEO
Alex Svanevik, CEO of the blockchain analytics platform Nansen, believes real estate could be a bad investment in the future. He argues that real estate is losing its status as a form of “safe” investment as alternatives like crypto and the ease of access to the stock market have emerged in recent years. This is an argument that has been supported by numerous other market experts a new investment classes have emerged in recent years.
Why Real Estate is a Bad Investment
People view homes as their most valuable asset, but that does not mean they are the best investment options, argues Brian Portnoy, CNBC commentator and co-editor of the book “How I Invest My Money.” According to Brown, real estate is an emotional investment.
“It’s really a form of consumption. You own the home as opposed to paying rent for a home that you don’t own, but you have to live somewhere,” Brown said. However, he added that after doing the math on homeownership and taking into account costs like repairs, renovations, and inflation, real estate ends up underperforming other markets.
Moreover, with better investment options available, real estate is expected to further underperform the market in the future. For instance, the crypto market is a relatively new player that has been on a tear since its inception, outperforming nearly all markets by a wide margin.
Furthermore, the global total fertility rate is on a sharp decline, explaining why the UN expects the world population to plateau at around 10 billion. This population decline will likely result in a decrease in the rising demand for housing.
It is worth noting that real estate purchases are usually leveraged, therefore owners have to continually pay interest on their loans. These interest payments are made with the premise that real estate prices will rise. However, if prices don’t rise, investors would end up bearing major losses.
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Virtual Real Estate Investments Soar
Some investors are increasingly investing in virtual real estate, otherwise known as the metaverse. The metaverse is a virtual-reality space where users can communicate with each other inside a computer-generated environment.
Crypto advocates believe the metaverse is the next iteration of the internet and will be powered by Web 3 applications, which are open-source, decentralized, hyper-efficient, and remove the need for intermediaries using smart contracts.
Meanwhile, investment in these virtual universes has picked up steam. Just recently, Tokens.com, a publicly-traded company that invests in revenue-generating digital assets, purchased 116 parcels of virtual land in Decentraland, a virtual world, for more than $2 million worth of crypto assets.
Back in June, another patch of virtual land on Decentraland was sold for around $1 million worth of crypto. The lands that are sold will be recorded as a non-fungible token on the leading NFT marketplace OpenSea.
Aside from Decentraland, another metaverse project called The Sandbox has also seen substantial demand for its virtual lands. “Land that sold for $48 in a presale in December 2019 now has a floor price of more than $4,000,” DappRadar reported earlier this month.
Arguably, that is because luxury brands expect to benefit from virtual universes by promoting their physical brands or even by providing entirely virtual items. Moreover, virtual lands don’t come with extra expenses like repairs or renovations.
Just recently, major sportswear brand Adidas Originals acquired a 144-parcel space in The Sandbox’s metaverse, saying that they are “headed for the Sandbox with our first immersive and always-on virtual experience.”
Similarly, Nike has recently revealed its virtual universal. Dubbed Nikeland, it is a 3D space where players can connect, create, share experiences, and compete using avatars that have the option to outfit virtual, special Nike products.
Do you support investing in virtual lands? Let us know in the comments below.