Real Estate Crash

Im sure Im not the only one that has noticed the dropping real estate prices. I wonder if the lindens land auction expansion has triggered this and if they thought about the consequenses of releasing so much land on the market at once. In RL the saying is"god dont make anymore land". that doesnt apply here and maybe thought should be paid to that before there is alot of upset folks that bought their dream land for 15-18M then a week later they just lost 1/3 their equity because of the release of so much new land on the grid.

The peril of land ownership, I fear. I've been looking for land for a while now but everything's been just too expensive for someone just starting out. (Please don't talk about First Land - it's next to impossible to get). Hopefully the fall in land prices will let those of us who just want our own home, not a giant club etc, to live our dream.

I bought myself an extra 109k sqm of extra cheap land Hopefully it works out for me...

If people actually looked at the auction sims, they'd see they're all water lots... So this should have little impact on the value of anything other than waterfronts and water lots.

You don't build equity in SL land. You pay a one time purchase fee and monthly tier payments to cover the bandwidth usage of your property. There is no historical precendent for average gain in land value over time. So, you overpaid for your dream property - people do that all the time. People have been all over these forums telling everyone that this land pricing is an anomaly, we are in a bubble, and it is going to crash when LL starts releasing new land.

This isn't the first time the Lindens have released a bunch of land at once. It's their MO. Buyer beware. Prices were artificially high due to land speculation. The only people this hurts is flippers.

I remember years ago, the Lindens released a few dozen sims at once and literally doubled the size of the continent.

I wouldn't quite call it a crash, but there has been an adjustment downward as auction sale prices have leveled off.

Um, 512s are going for less than $5,000 right now - someone thinks there's a crash. Personally I think it's an overreaction - time to stock up on land while it's cheap.

Wow... I don't have the computing power right now to run SL and see. It probably came about since LL just dumped a couple dozen sims on the auction block. Interesting...

I've been trying to warn people:

http://infomyth.com/sl/Guides/land_bubble.htm

It didn't crash the way I thought, I didn't think Linden had the b***s, but they did -- they realize that long term high prices hurt everyone.

Don't blame Linden, their goal is to get as many people enjoying Second Life as possible; blame speculators who bid sims up to $4,800 in an effort to make as much profit as possible.

This correction was predictable and necessary, and inevitable -- by popping the bubble now Linden Labs has prevented even greater catastrophe when (not if) the bubble pops in the future.

All in all a good thing, although I do have sympathy for new registrants who didn't realize the historic value of land.

Now my next prediction: someone will launch a class-action lawsuit lol.

Darius, if Linden was serious about making land available, they wouldn't just set these out to auction, they would carve the MFs up and set it out as first land. I noticed that some of the "full sim" auctions are not the full 65536. I assume a few thousand is reserved as first land, or maybe protected land. If they want the land to be available to people, they won't be lazy like this - they'd carve it up and make more first land available.

Nevermind. Jokes on me

I wouldn't be surprised if they roll out another huge swath specifically for first land by next week at the latest.

Not true at all. Some waterfront, but most are just ordinary sims. Prices will now fall everywhere, for every bit of land. Island rental rates will now decline as well as mainland becomes competitive.

Linden is beginning to do that, the <20000m parcels in the U.S. $ auctions are relatively new. Plus I don't see the harm in releasing land wholesale at auction and having the community chop it up, as long as the margins are reasonable and the recent unbridled greed doesn't drive prices to astronomical levels. Nothing wrong with people in the land business, but the excesses of the past few months were intolerable.

I think that releasing a bunch of sims at once like this also is necessary for making first land available. Previously people would make alts for the sole purpose of snatching up first land. I remember reading the land forum where people are bragging they have dozens of 512m chunks of land for sale for L$8,000 or so each in new land sims. By helping bring the market back to its normal (Sept. 2006) level, first land scammers have less incentive.

Darius, I just read your article from the hyperlink you provided and I must say, good job on predicting the outcome beforehand Also, thanks for the tidbit on godaddy, some interesting info there on server costs which I had no knowledge of. I for one certainly agree with your conclusion about private islands. I was seriously considering investing in them because mainland was going down, but then as you said in your article, a little light bulb went on in my head and I realized that if prices crashed to where they are now, that it would be considerably cheaper to live on the mainland than on islands. Now, I wish that light bulb would have turned on about mainland prices

Reece, I sincerely hope you have walked away without too much damage

Daris, I commend you on a well written article that is exactly what has happened and why. There will be a lot of money lost; irrational exuberance has struck again.

Land in SL is not an investment, "land" is your personal sandbox space on a server, somewhere in San Francisco. To think of it as an investment is to not understand how SL works at all....

Would anyone like to buy a tulip? One previous careful owner. I can do you a knock-down deal on a box of tulip bulbs while you're at it.

Thanks for your well thought out article, Darius Lehane, about the land bubble.

I can't wait till we see all the "told you so" posts.

Haha I was "telling people so", and then I ended up getting suckered into a good deal (at the time), which bearing how much the market has crashed, wasn't really a good deal I guess

Well dont wait too long. I posted about this very thing a few months ago when land was skyrocketting. Those that cashed out at the peak made a bundle. Those that are selling on the market now, are gonna take a bath. I love it. Serves them right.

Now we'll see a big shift into more stable business models, again.

But those who love the speculation market may find that managing sims is *very* different.



As the expression goes, gotta love it. If you don't, you'll find quickly that your 'dollar per hour' is terrible, and you would be better off getting a part time job at a deli.

At least at the deli, you won't have incredible tier charges should you botch a few sandwich orders or the customers don't like you.

But mess up when carrying a thousand USD a month of tier or more, and 'oops' will be redefined in an entirely new light. Incidentally, this is why I stayed completely out of the new land market since November.

Yes, I probably could have packed 'em in during the land boom, but ninety days later I would have had to face X number of sims full of upset people who got in when the market was high. No thanks.

I didn't have much land come available during the boom, I'm still solid full with a waiting list, but what land I had went for $L 4 per meter. Yes, you read that correctly. I could have *easily* got far far more than that, considering what I have to work with. I might have to go to $L 6 or $L 7 on new sims due to the tier increase, but I think anyone that deals with people over the long term will rapidly come to understand why I operate this way. People remember how you behave.

It's going to be very hard to shake the reputation and obvious motivations of the typical land speculator.

Good luck, all.

Being a reasonable and fair person in your business dealings in SL doesn't just apply to land dealers; it only takes a few bad deals for the word to get around and your reputation to be forever damaged.

Obviously there are a number of people who prey on clueless noobs - such as those offering "first land" at about L$8000 instead of the real Linden first land at L$512 - but usually by the time they realise they were had, it's too late.

I wish there was an easier way for people to ask questions like "what do you think about this plot of first land" with independent, experienced people to answer. Live Help isn't really any use for these kind of questions any more, the forums here are next to useless, and Linden Lab doesn't seem to have any interest in it either.

Scam any noob, and the chances are they won't stay around long. We don't need however many million signups, we need paying players to be able to grow - and that paying investment will allow Linden Lab to scale their work accordingly to unbottle some of the big holdups that cause lag. I think a big help would be a wider distribution of server farms around the world, because I'm quite sure that a lot of the problems are being caused by a concentration of bandwidth all going through a finite number of almost-at-capacity connections into the main colo in SF.

Broccoli

I warned about this as well both on the BBs and blogs, and also privately to several larger land barons, one avatar in particular got very cross with me when I offered to take the best part of a sim of his hands for just under $L13 per square meter. I bet he would snatch my hand of now. (And yes this is an "I told you so" post)

However I do not wish to be unkind, Land Barons DO perform a useful service in SL by buying larger blocks and passing it on to retail purchasers in modest size blocks. My suggestion now is to those effected is to take the hit and off load it at forced sale value, say less than $L12 per square meter. At least then they can cap their losses and recover.

One final point, thanks to advice from Desmond Shang on a technical computer issue before Xmas, I can indicate that IMHO there is a very substantial improvement in performance from class 5 sims, even void ones.

Therefore I think that in some cases the market may evolve further, that is class 5 sim land will command a slightly better price than most older class 4 and class 3 server land, with the possible exception of some premium old continent land (either higher raise/lower land and/or higher prim count land) and perhaps some older land of great natural virtual beauty.

Just a personal viewpoint

Regards

John

I personally don't recall anyone warning that LL would issue a panic causing statement and then back it up by dumping a huge number of sims on the auction block. Nobody even really mentioned the inherent instability in the market caused by LL being willing to do things like this. Although, I guess in retrospect that fact was obvious.