Real Estate Could Be Outflanked By Other Investment Assets: Nansen CEO

Neither the author, Tim Fries, nor this website, The Tokenist, offer financial advice. Please consult our website guidelines before making any financial decisions.

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 “safe” form of investment, as alternatives such as crypto and easier access to the stock market have emerged in recent years. This is an argument that has been supported by numerous other market experts as new asset classes have emerged in recent years.

Why real estate is a bad investment

People consider homes their most valuable asset, but that doesn’t mean they are the best investment opportunity, argues Brian Portnoy, CNBC commentator and co-editor of How I Invest My Money. Real estate is an emotional investment, according to Brown.

“It really is a form of consumption. You own the house instead of paying the rent on a house you don’t own, but you have to live somewhere, ”Brown said. He added, however, that after calculating home ownership and taking into account costs such as repairs, renovations and inflation, real estate ultimately falls short of other markets.

In addition, it is expected that real estate will continue to lag behind the market in the future due to the better investment opportunities. For example, the crypto market is a relatively new player that has been in crisis since its inception and far outperforms almost all markets.

In addition, the global total fertility rate is falling sharply, which explains why the UN expects the world population to stabilize at around 10 billion people. This population decline is likely to lead to a decline in the increasing demand for housing.

It is noteworthy that real estate purchases are usually financed with leverage, so that owners have to continuously pay interest on their loans. These interest payments are made under the premise of rising property prices. However, if prices didn’t rise, investors would end up suffering huge losses.

Great diagram from a presentation by Lu Han at UofT

Low interest rates have reallocated loans / investments in real estate.

Why is that bad?

Because real estate is a far less productive sector of our economy. pic.twitter.com/AZmHGkf7z2

– John Pasalis (@JohnPasalis) May 26, 2021

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Virtual real estate investments are increasing

Some investors are increasingly investing in virtual real estate, also known as metaverse. The Metaverse is a virtual reality space where users can communicate with each other in a computer generated environment.

Crypto advocates believe the Metaverse is the next iteration of the internet, powered by Web 3 applications that are open source, decentralized and hyper efficient, eliminating the need for intermediaries with smart contracts.

Investments in these virtual universes have now picked up speed. Most recently, Tokens.com, a publicly traded company investing in revenue-generating digital assets, bought 116 parcels of virtual land in Decentraland, a virtual world, for more than $ 2 million in crypto assets.

In June, another piece of virtual land was sold on Decentraland for crypto worth around 1 million US dollars. The sold lands are recorded as non-fungible tokens on the leading NFT marketplace OpenSea.

Aside from Decentraland, another Metaverse project called The Sandbox has seen significant demand for its virtual lands as well. “Land that was pre-sold for $ 48 in December 2019 now has a reserve price of more than $ 4,000,” DappRadar reported earlier this month.

This is arguably because luxury brands expect to take advantage of virtual universes by promoting their physical brands or even offering entirely virtual items. In addition, virtual lands do not come with additional costs such as repairs or renovations.

Just recently, major sportswear brand Adidas Originals acquired a 144-parcel space in The Sandbox’s metaverse and said they are “heading for the sandbox with our first ever immersive and constantly active virtual experience.”

Similarly, Nike recently unveiled its virtual universal. It’s called Nikeland and is a 3D space in which players can connect with avatars, create, exchange experiences and compete against each other who have the option of equipping virtual, special Nike products.

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About the author

Tim Fries is the co-founder of The Tokenist. He holds a B.Sc. in Mechanical Engineering from the University of Michigan and an MBA from the University of Chicago Booth School of Business. Tim was a senior associate on the investment team in the US Private Equity Division of RW Baird and is also a co-founder of Protective Technologies Capital, an investment firm specializing in sensor, protection and control solutions.