A concept photo of metaverse Photo: VCG

How much would you spend to buy virtual land in the metaverse, a virtual world that runs in parallel with real life? In recent days, the land rush in the metaverse has been making headlines with a $4.3 million record high purchase of a plot of land in Sandbox, a blockchain-based decentralized metaverse developed by a US firm - the equivalent to the price of a luxury villa in Beijing's inner suburbs. 

China is also witnessing a similar digital land craze. In Honnverse, a newly launched Chinese metaverse game which opened testing to a second tranche of users last weekend, property prices have skyrocketed 100 times to a new high of around 20,000 yuan ($3,143.7) per suite, with the price of a virtual piano - a symbol of players' status - also jumping more than 10 times to 1,000 yuan.

A screenshot of Honnverse, a Chinese metaverse game

Is the metaverse real estate boom a "gold rush" or a bubble about to burst? Some remain skeptical, while a small number of Chinese investors have been buying into the concept, drawn in by stories of how cryptocurrency, such as bitcoin, has led to an explosion of wealth. 

Analysts stressed that the genuine value of virtual land hinges on the economy of metaverse games themselves, and that Chinese game developers are far away from developing a sustainable and mature business model when compared with their US peers. In the long-term, the country's sheer market size may make the prospect of the metaverse game feasible, yet compliance, infrastructure and tech issues remain key obstacles.

In the Honnverse game, players can set up their virtual character, acquire virtual apartments which they can decorate. Players are also able to display their non-fungible token (NFT) and visit other players' homes to interact and network. Furnishings and decorations can be acquired both through formal channels, or through private trading between players. 

"Honnverse is trending among all Chinese metaverse games, and some players have made tens of thousands of yuan from real estate speculation. It is now very hard to acquire an apartment in the game, and there are even chat groups on social media platforms being set up just for selling and buying second-hand virtual apartment," a 20-something gamer who preferred not to be identified, told the Global Times.

The game has been in testing for around a month. According to media reports, the game developer will issue a total of 350,000 apartments, with dwellings divided into six classes, with the most expensive known as a "SS-level costal island house." The developer will randomly distribute 20,000 suites to users for free.

The Global Times found that the SS-level second-hand virtual apartments on Xianyu, Alibaba's second-hand goods exchange platform, were being traded between several thousands to close to 20,000 yuan. Even the lowest class of virtual home was trading for 300 yuan. All those property assets currently listed as sold are the free suites which the first group of gamers were gifted for free.

A screenshot of Honnverse, a Chinese metaverse game

"Speculation has pumped up the house price to an unimaginable level. Every day the price is different, and you may see an asset price doubling within three days," the anonymous player said, adding that to curb speculation, the developer even issued a new policy that only allows player to sell their house after 15 days of ownership.

The player, who refused to disclose the amount of money he made through trading his virtual apartment in the game, said that the major force of Honnverse's user base are investors who are obsessed with uncovering potential opportunities in Chinese games, on heels of eye-catching purchase of virtual land in overseas metaverse games. 

Overseas model

Some players said the Honnverse is just a rough version of overseas metaverse games, including the two most popular games - Decentraland and Sandbox. In overseas markets, the priciest deal so far is the $4.3 million purchase of land in the Sandbox metaverse by Republic Realm, an investment fund with focus on the metaverse real estate ecosystem.

The previous record was a $2.43 million land sale in Decentraland, by NFT-based virtual real estate company Metaverse Group. The piece of land has an area of 565 square meters, translating to $4,300 per square meter, far more expensive than home prices in many Chinese second- and third-tier cities.

"There are fundamental differences between Chinese and overseas metaverse games. First, Chinese games sell houses, while the foreign developers sell land, upon which buyers are able to design and build their own properties via coding. Second, most buyers in either SandBox or Decentraland are institutional buyers, while players in Chinese metaverse games are mostly individuals and speculators," an industry insider surnamed Zheng told the Global Times on Tuesday.

Janine Yorio, co-founder and CEO of Republic Realm, the company which made the record purchase, said that the reason why the company paid so much is because they "want to do something big, something very immersive," the Business Insider reported.

"There is an emerging logic for making profit at either Decentraland or Sandbox. Virtual art exhibitions have already been held at the game, selling NFTs and other digital collections. Some companies, including influential crypto companies, also plan to set up virtual headquarters in these digital worlds. This is the real demand that will boost to the virtual land's long-term valuation," Zheng explained. 

Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times that there is still a conspicuous gap between Chinese and US metaverse game developers in terms of their business models and basic infrastructure. 

"In China, compliance is also a key as many metaverse games issue their own crypto currency as the games' 'currency in circulation.' Chinese regulators have strictly banned any crypto issuance and mining, and every Chinese metaverse game must strictly follow the regulation," Wang said.

But analysts also believe that China's massive market and its robust capital market may also aid it in closing the gap with foreign competitors.