Land Prices?

...who was wondering what happened to drive the avg price from L$6.2 to over $L8 as of Feb 21. I think it's worth pointing to the fact that the latest economic stats show the avg price for land for Feb Month to Date settled to $L6.7. January ended with an average of $L6.5. December close with an avg of $L6.3. All in all a reasonably stable and not outrageous price.

Unlike RL land, land in SL is not a inelastic commodity. Totally new mainland real estate does come onto the market from time to time.

Additionally people don't have to have to own land in SL to play or enjoy the game or even operate a business enterprise. The pool of valid potential end consumers for land purchase (i.e. Premium accounts that can own land) who are actually interested in buying land is limited. If land prices become outrageous (in the eyes of the "end consumer" those end consumers who are in the market to buy will not buy. If those end consumers stop buying, the land speculators will not be selling and their inventories will grow (or at least not decrease). Land specualtors can sell to each other all they like, but eventually (if they are trying to make money instead of just throw money away on tier) they're going to have to unload it and I don't think any sane speculator will pay more for a piece of land than he can reasonably sell it for (now or at some future date) if he is competent in his trade. If he is not competent in his trade, being a competitive environment, he will go out of business or be run out of business by competitors and his land will STILL get unloaded one way or another. Woe be to the land speculator with his tier all tied up in a crapload of overpriced land nobody will buy when the Lindens dump more mainland real estate on the grid.

So in the end, with inevitable expanssions and contractions, prices will settle. I think the last 5 years have shown that to be true.

Isablan I think explained the problem with this though. The problem is that the land market goes down a lot more slowly than it goes up. The reason why this happens is because of the following process:

Reseller A decides a parcel isn't going to be profitable, so sells it cheap. In the real market this would compete with other resellers for customers and cause the market to go lower. But what actually happens is that Reseller B quickly buys it up, unaware of the history and thinking it's a profitable deal for them, and sets it for sale at the same (unsustainable) price, where it will stay (still not selling) until the tier starts hurting them. And when that happens they sell it again, but it goes to Reseller C and so on..

How about the way some convenience stores and fast food drive-thru windows have started putting out "tip boxes"?

How, exactly, did Tommy at BurgerWorld become deserving of a tip just for handing me my BiggieBeefyBurger with fries and a shake through a tiny window.

I meant it supports LL who keeps SL running, not the SL economy itself.

I understand and agree that prices go down slower, but this is true of RL as well. Prices generally rise much faster than they lower. Right now the SL land market is pretty stable with small incremental movements. Do we really want land prices swinging dramatically?

I don't recall the price of land decreasing quickly even before the influx of land flippers/bots appeared. Land owners still wanted to make the most profit possible.

I don't know how they arrive at those figures, but it has nothing to do with the reality of the average price anyone can find inworld right now or for the last month. The BASE price is L$8.5 a meter. So the actual average is a lot higher for anyone wanting to buy land publicly.

I was kind of wondering if all these people who are complaining about land flippers would sell their parcels for less than they initially purchased them, if it came time to sell, or if they would expect to sell them for more than or the same as the initial purchase price.

And would this expectation change if the market was considerably higher or lower than it was at the time of initial purchase?

A valid question as to how the reported avg. price is actually calculated. There's obiviously more to it then is apparent on the surface. Perhaps it's based on the amount of money that actually changes hands, not just what it is listed at?

I've found that you can buy land for less than what the seller has as the listed price if you're patient and are willing to negotiate directly with the sellers. I've bought several parcels for below the listed price on the land. I've also done land swaps. (I set my parcel to sell to you for $1, you set your parcel to sell to me for $1, we both get what we want.) I'm sure I'm not the only person that does this. How much does it happen? How big is the impact? No idea. Nobody has stats that I know of so nobody can legitimately provide anything more than their best guess and opinion. *shrugs*

Though even so, L$8.5 / SqM isn't a rate I would consider outrageous.

Yes, a lot of land changes hands through private sales, some for as little as $1. But these private sales of mainland have no real bearing on the average land price as far as a buyer searching the public list goes, so I wish they would find a different way to arrive at an average.

Yes, a lot of land changes hands through private sales, some for as little as $1. But these private sales of mainland have no real bearing on the average land price as far as a buyer searching the public list goes, so I wish they would find a different way to arrive at an average.

L$8.5 per meter is not outrageous but good luck finding a nice parcel in an attractive area for that.

In real life property isn't flipping between resellers after an end user exits. It's usually from one end user to another, because true realtors help people find properties, not purchasing them just to mark it up few percentage points. Few properties irl are so undervalued that it would be profitable to jump in and resell.

You take the market as it comes. If I absolutely needed to exit the market and sell I'd cut losses and sell just below market value. If that was a significant loss, it would be my loss, but if the choice is paying tier for another month or taking the loss, i'd take the loss.

That is why I thinbk land bots have a role in this virtual community Cristalle as they improve liquidity. In a way it is a type of "short selling".

If you consider an average size plot at 4096 square meters, and an average fair sale price for reasonable quality land at say $L15 per square meter that equals around $L61,000 Linden dollars.

But monthly tier on that land is $25 US dollars per month or $L6,750 Lindens. It would possibly pay you to off load that fairly quickly if you no longer want it, taking into account exchange conversion fees and Pay Pall charges

When you commit such a basic error such as conflating inflation with a middleman mark-up, one has to wonder if you have any idea what you are talking about.

P.S. I am an ex land speculator.

I can't speak for "all these people".
I assume that an end user who was cashing out would appreciate getting the highest price achievable under whatever time constraints might be driving their decision.

That price might be lower or higher than the purchase price.
If end users cash out at lower, then they are simply taking a once-off hit in order to dump tier.
If end users cash out at higher, then that would generally be a once-off happy accident due to the market rising while they had fun using the land.


If people who have bought land for projects and then sell it in order to buy in a different location they would be facing into a higher or lower market price level. They would expect to sell at the new market level so that they could buy at the new market level.
Any "profit" is notional as the money goes straight into the new parcel.
Any "loss" is notional as they have simply changed the location of the land on which they are paying ongoing tier.
The initial price that they paid was simply what they had to pay at the time in order to get into a tier level.

Their focus would be on using the land for builds, and not on land-dealing.
A land-flipper's focus would be purely on buying and selling as quickly as possible while juggling markup and discount levels on tier.


Your "kind of wondering" is a transparent attempt to wave a hypocrisy flag.
It doesn't work
There's a huge difference between someone who occasionally moves their base/home and someone with a business of continually turning over square metres.

I'd make a big markup if I sold my land at current levels.
How about a 4096 double-protected corner of a sim with three Linden oceans touching it? Should I sell that for the purchase price of L$13 /metre?

However, it's not for sale. That's not why I bought it.
If the market falls, it doesn't matter to me in the same way it would to a land dealer.
If the market rises significantly, it would really only matter to me if I wanted to significantly expand tier as opposed to move deckchairs on the Titanic.

To an end user on a level of tier that they are comfortable with, market movements really only matter if they affect the sustainability of SL as a whole.

If the land bots didn't exist, then a human would be able to pick up any land priced to appear in the first page of Search.

A bot guided by a federated hammering of Search will improve a sellers liquidity if the seller suddenly needs to dump tier in the next few minutes.
A human using Search will do exactly the same job if the seller is prepared to wait for maybe a few hours.

Normally, yes. In the recent bubble that was exactly what was happening in the "hot" bubble markets. Properties flipped back and forth between speculators constantly until the "greater fool" ended up holding the bag. There were several things that were integral the US housing bubble:
1) a generation of people who have started looking at a house as an investment, not a home.
2) an expansion of credit so extensive that anybody who could fog a mirror qualified for a $700k loan.
3) greed (and by greed I don't mean strategic leveraging of assets for profit, I mean acts of irrational exuberance by people who have learned nothing from history.)

I personally think there is a huge difference between end-users who are buying land in SL on the assumption that it is an "investment" that will go up over time and those who just want their own piece of SL. I got lucky and sold off my land in Federal at huge profits but luck was all it was - I would have sold it for a loss to get out from under the tier once I had a sim to support. Most assets fluxuate over time, including land/housing. There are boom markets and bust markets - that is pretty much called the business cycle. No one ever buys an automobile thinking its value is going to go up over time (unless you are into collectable cars.) I honestly cannot think of one single thing you can buy that is GUARANTEED to rise in value over time.

Failure to recognize that markets fluxuate is what leads to whining on message boards about loss of value. The buy low/sell high game requires more patience than most people are capable of. If you are going to try and profit off your land over time then you have to time your exit - what happens in reality though is that people buy and when they decide they want out the market isn't in a favorable cycle and they pitch a whine-fest here on the forums about their loss and how LL suxxors because they keep releasing new land and devaluing existing land.

Read any USA RL newspaper and you see the same stories of people who bought houses too close to the top of the market and now that they are underwater on their loan to value they all have sob stories and "it isn't fair."

/me updates ignore list

Isablan, you said it best. Thank you.

From LL's perspective, speculators or "flippers" as they have been described here are also considered end users.

To anyone who has an issue with land speculation in SL:

Don't hate the player, hate the game.

Take it up with LL.

Thanks

I think you misunderstand/over-react.

I'm not sure that anybody
- "hates" flippers
- expects that the practice would be banned/restricted in some way

"Don't hate the player, hate the game."
I love SL.
I recognise that some others love it for different reasons.
I just happen to find the practice of buying plots just to put them back on the market immediately for a higher price simply increases costs for people who want to actually use the land. I think the practice is a less than imaginative use of the technology.


To anyone who has an issue with people posting this sort of view here:

Don't hate the poster, hate the Forum.

Take it up with LL.

Thanks


Smooooooooooocchhhhhhhhhh!

I agree 100%. Especially since anyone may sell any parcel at any time for any price they choose. Even ad farmers may still do this, though they risk being sanctioned.

I am certain that LL would not like to give up the monthly tier paid by the land flippers, either.

They would, if it went to someone at a lower tier level who was paying more per sq m.

There is however a problem when people are actually leaving SL because of the high land costs.

The problem is that the market, in this case, can only close the stable door after the horse has already bolted. Yes, lack of demand at the current price will eventually pull prices down but that does nothing for the person who left 6 months ago because land prices were ridiculous (and who told all his friends not to bother with SL, too).

Tier costs, not nominal land prices, are the major deterrent to land ownership.

I believe that we will see initiatives in the near future that will address this issue.

Not sure if these initiatives will come from LL or from the outside... We have become accustomed to tier prices trending up, but I suspect the next move might not follow this pattern. However that's just more 'speculation' on my part.