Land Being Repriced

The most fascinating thing has just occured. Another land trader seems to have bought all of my waterfront land, and marked it up to L$15/m2 - L$20/m2. I try to give good land for a good price, but it looks like that is over now in our AquaTerra custom mainland development. Early indications are saying that other land traders may have been bought out by this trader and repriced in the same fashon. What does the community feel about this price point? Can waterfront valuations of L$20/m2 stick long-term? If so, that'd be great!

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An impressive gamble, however one that might be contrary to Linden Lab's requirements at this time and no matter how big we think we are or how loud we think we can squeak, they are still the only elephant in the room.

I do hope that no new user gets confused by these prices, though. I can see scenarios playing out where they don't do their research and end up purchasing a lot of inflated value.

Hehe

I don't think it'll stick ... it didn't before, no reason it should now. I don't think LL really wants land that high, afterall, if land is prohibitively expensive for new people, LL's business dries up.

Land is infinite in SL thats why this monopol strategy won't last forever.

It will be interesting to see how this plays out.

My guess is the weight of tier, slower turnover and alternatives would ultimately be the killers of a plan like this?

Quite the opposite, I'd think. With these kinds of margins, it can sit for a year and still turn a profit.

The land market is such a load of bull. Charging more for Mature land when, ahem, PG is actually SCARCE... and waterfront? Please. The way LL has designed the terrain, all twisty and winding... I'd hazard a guess "waterfront" is plentiful.

You'd guess wrong, which kinda what this whole thread is about.

Saying "land is infinite" is a bit like saying "computers are infinite"; it's not entirely untrue yet wildly inaccurate.

The word you are looking for is indefinite, as in "Linden Lab may add more servers and create indefinite amounts of land". However, this is still a long way from "infinite", or even "a lot", since they're bounded by how many physical blinkenlightz boxes they can afford.

In an economy, what is scarce or plentiful can not be measured by simply looking at the supply side (how much of it is available). It all depends on the balance of demand and supply.

Something can be rare, like PG land, yet it is "plentiful", because supply exceeds demand (which our sales data clearly shows).

Something could be (relatively) plentiful (but waterfront isn't, its rarer than PG land ), yet "scarce", when demand is much higher then supply.

Fresh waterfront is "scarce" in this (purely economic) sense.

Shaun, I often agree with your opinions. But I strongly disagree this time.

I sincerely doubt that doubling the price for land will be good for the SL economy; especially if it is happening this fast.

Looking at it from a short term perspective, those prices seem "nice" of course to all of us holding larger areas of waterfront. When the representative(s) of the group in question flew around in SL last night, we sold more than 60,000 sqm of our most expensive land in 2 hours and made a nice profit. Nice. Short term.

The sad thing is, many resident run businesses in SL follow the short term perspective. No large investments. Making a quick buck. This makes you very vulnerable to anyone following long term goals.

If there is a strategy behind this move, to corner the market for waterfront in SL, and if this strategy works out, the near-monopoly in the SL land market will be strengthened. I very much doubt that this will be "great" for competition and the competitors. All markets in RL where there are strong monoplistic structures tell a different tale.

Also puts everyone in a bind at the auction block. Do you bid enough to win a water plot on the assumption you can get the new high price or do you let it go to the person who can pay more because they believe they can get the new high price? Most of the upside potential in this move rests with one person right now I think of course so does most of the downside potential.

I think you can't really apply RL models to SL land.

In RL If only .01% of the people can afford land, but there are huge chunks of land for sale you could buy them up if you had enough money and wait until times change. If you can hold out until prices rise you're in a good position. Tho remeber you pay property taxes and the costs of building upkeep which are far more substantial than tier rates on large chunks of land. There is the old saying "Buy land, they're not making any more of it".

RL Property Costs (16 Acres, one SIM)
(Holding out for a value of 30,000$ per acre (480,000), 1.3% average property tax rate, no structures)
Purchase Price = 15,000$ per acre, 240,000$ total (we'll say you got in before land rates went up)
390$ Property tax per acre * 16 acres = 6240$ per year in taxes (figuring a 10% valuation even tho vacant land is computed at 16% normally)
Add in 1200$ per year for maint. to keep the grass mowed, trees trimmed, for-sale signs maintained, etc.

Assuming you had the income from other sources to pay the bills you could hold out for 17 years until you came close to not making a profit.

Time in Years, cost in USD:

1. 13680
   
2. 27360
   
3. 41040
   
4. 54720
   
5. 68400
   
6. 82080
   
7. 95760
   
8. 109440
   
9. 123120
   
10. 136800
    
11. 150480
    
12. 164160
    
13. 177840
    
14. 191520
    
15. 205200
    
16. 218880
    
17. 232560
    

This is a pretty safe investment, people that bought land near Phoenix raked in massive profits just like this, partially because as places expand where else can you buy? You can't just make new land.



Now we have SL

SL Property Costs (One SIM)
(Holding out for 20Ls per sq meter, 81920Ls per acre, 1,310,720 total (4096m is one acre) no use for the land while waiting to sell)
Purchase Price = 20,480L$ per acre, 327,680L$ total (We'll say you bought at 5Ls per meter, the cost of a new SIM is 350,000L$)
16 Acres = 204.95$ per month tier = 57386 Lindens (average 280 to 1 exchange rate)

Assuming outside income you could hold out for 19 months before not turning a profit.

Time in months / Cost in L$:

1. 57386
   
2. 114772
   
3. 172158
   
4. 229544
   
5. 286930
   
6. 344316
   
7. 401702
   
8. 459088
   
9. 516474
   
10. 573860
    
11. 631246
    
12. 688632
    
13. 746018
    
14. 803404
    
15. 860790
    
16. 918176
    
17. 975562
    
18. 1032948
    
19. 1090334
    

The major difference is unless someone REALLY wants that specific piece of land in that sim where you have it, there is always going to be cheaper land. More waterfront will be created as time goes by, and it will be alot less than 20Ls per m sq.


Personally I don't think holding out for 20L$ per m sq is a good gamble.