Land Market analysis - what happened!?

just to add some thought for this subject

One thing seems to be the supply and demand, which says with current figures that unless Linden Labs give enough mainland land for auction, then there is no reason for prices to go down.

Another thing is of course Linden Labs succeed to keep the trend in increasing new users and not messup the whole thing (it's quite difficult though to keep going on-scalability issues- and double your infrastructure every 2 months. ). If they start loosing users because of not satisfying accesibility and reliability issues, then they will not stand long.

The auction prices lately shows that too many want to be land barons. And also a fact is that just 10 days ago you could buy 8192 sq.m. with 75-85k L$ (I bought in this price). Now, you can find only slopped hills and some land on the clouds of the mountains for 100kL$ a piece.

This trend can't continue anyway and things will ease a bit. And this is because, for me there seems to be a logical limit on the upper auctioned land price for a sim.
Right now many sims are going for over 3000 US$. The limit I see is the TCO for owning a sim for 1 year (even if you are going to sell this after a month). TCO for a mainland sim could be then 3000+(12*195)=5340 US$.

To own a private island for 1 year with current prices is 1675+(12*295) =5215.

So you see, you haven't still reach a point where you say that it's stupid to own land in Mainland since you can have your own private island. If it will go more than 4kUS$/sim? I hope we'll be here to see if it will happen or not. Time will tell.

If you add on that that it's more easy to sell and buy land on mainland (due to payment terms), then I could predict, that the land prices haven't still gone to the highest limits based on the above assumptions.

The reason I am referring to sim prices at auctions is because the price the land baron buys, sets also the limits of minimum sale point to the next owner or reseller. So , if no crash is near, then you don't sell if you are going to loose money. The only reason to sell lower is when you want to get away anyway from SL and you give everything half price or for free.

Also another reason for seeing the prices in land going up , is the fact, that much of the land in mainland is being destroyed by cutting it in small pieces. (ex 512 or 1024 etc). So after sometime, if someone wants a big piece of land for a specific usage (theme park, big house, big project ), believe me , there are not hundredns available. Do a search for 8192 and over pieces of land. Right now maybe you can find 200 or something in the search, but most of them are not in Mainland. So , the problem of finding these kind of land will stay alive for long long time, and this justify also the price hike.

For new users that just want to get a small 512 piece of land, these prices for sure doesn't help. Lindens should think their workaround with that.

Last comment, not all the land pieces are the same, and since you can't modify even the whole sim in Mainland, then it's justified to see big differences in price ranges. If also the prices are considered to be very high and crazy from greedy people, then we simply don't buy.

sorry for the long story.....

I see this as a mirror of the RL real estate bubble, which has been almost exclusively driven by two things: relaxed lending standards by mortgage writers (not applicable to SL) and speculators doing stupid things without much thought behind it (totally applicable to SL.)

I watched a large parcel of land in the sim next to Federal change hands between various land resellers for almost a year. One reseller would buy the parcel, jack the price up to something totally unreasonable, sit on it for a few months, realize it wasn't selling at that price, then they would start dropping the price. Eventually, the price would drop low enough that another land reseller would fly by and go "hey, lookee here at this land at $15L sqm in a Core sim, I can sell this for $25L sqm in a heartbeat..." And the process repeats itself over an over, while the land just keeps changing hands between resellers (exactly the thing that flippers were doing in RL real estate.)

I recently sold two of my large parcels in Federal and am watching the resulting reseller shuffle with much amusement. One of those parcels is listed at $39L sqm and the other at around $30. Eventually these morons will drop their prices when the land doesn't sell and another idiot reseller will buy and back up the price will go. The only guy who made a profit is the first one who sold at double what I had put the land up for originally. The only profit to be made was right after the original sale of the land. The smart guys in this scenario are the ones who nailed that land at the reasonable price and then resold it to less-bright resellers, who will continue to trade the parcel for months and never end up making a profit.

THAT is what is up with land prices, it has nothing to do with actual end-user demand, it has to do with resellers trading the same parcels back and forth trying to be the next Anshe. The same thing that happened in RL will happen in SL, end users are priced out of the market and will stop buying, leaving resellers holding overpriced inventory where they take huge losses.

Anone looking for land would be far smarter to rent on one of the vast number of new sims coming online.

Granted that may be some of it, but it is economics at work here. The news headline today states that the population in the last two months has doubled. From 1 million to 2 million.

Let's say 50% are actual new residents and not alts or what ever. 500,000

Let's say 50% of those are actually interested in owning (not renting) their own land. 250,000.

Let's say 50% of those have either found the land, rented or gave up. 125,000.

I'm sure we can come up with some other variable here, but I think you can see there are probably around 100,000 new residents looking to buy.

There is the demand. Not even including "old timers" wanting to expand, move, etc.

The "First Land" option is quickly being bought up and you can see many post on here about finding it and how often is it generarted. I believe the increase in demand is from incoming new residents.

Sadly, the first land is more than likely bought by alts who quickly up the price and put it back on the market. Maybe they need to add a timer to first land and you would not be allowed to sell it for 30 days or something.

- Kat

I think you're overestimating a little there .

Out of 100 new people that sign up, only 10 will stick around (last townhall) and 2 out of those 10 are alts (september townhall I think). So out of the 1 million new people, only a good 80,000 are here to stay and at most 10,000 of those went premium (http://secondlife.com/whatis/economy-graphs.php) and are in a position to be buying any land and the large majority of those will be looking for the L$ 512/512m² first land they were "promised".

I think Kitty is correct that the numbers need to be reduced to be meaningful.

However, those numbers don't matter as much as the relative growth rates (population demanding land vs. amount of land). If demand is growing faster than supply, prices rise. If people THINK that demand is growing faster than supply, prices will rise (but only temporarily, because if people aren't willing to pay, they don't).

There are two factors to demand: number of people and how much each one is willing to pay. When speculation causes a bubble, the latter of the two rises artificially, because people pay not what they're willing to pay for the utility of the commodity, but because they think the price will rise and they can sell at a profit. Like tulips.

I believe we have both things going on here: the demand is rising relative to the supply, and speculation is escalating the price. Speculation increases the price in another way, too, by folks holding onto property they don't really want, just to get the profit, thus reducing the liquid supply.

This is one of the really neat things about SL: the economy. In some ways, SL is probably an economist's dream: what better laboratory? (If only they could adjust the variables ... but thank goodness they can't.)

I still don't buy that the demand is that high, if it were, parcels would not trade back and forth on the market and sit for sale for close to a year. If anything, prices should be going down; between Nov 1 and Nov 15 there were over 1000 new sims ordered, IIRC over half of those have been delivered already. If even 1/2 of those were slated for rental/resale that is still an entire continent of new, available land. If you look at the entire SL with the Land for Sale box checked, the amount of land on the market is astounding.

Bubbles have predictable stages. A few people who are in the right place at the right time with the right product make a fortune. Word of Big Money gets out and other, less experienced players jump in. Many of those players make a fortune, word gets out and soon everybody thinks they are one stock buy or IPO away from joining the millionaires club. As more amateurs flood the market, they drive prices up beyond all rational expectation. Once the amateurs get into the game, the smart people get out because they know the crash is coming and someone is going to be left holding a big old bag of an excessively overpriced commodity.

If the demand for land were really that high, the two parcels in Federal that I just sold would have new owners happily building away on them instead of being up for resale, where they will sit for a long, long time because they are priced too high.

That's fair, I wasn't aware of those numbers. However, I think it is fair to say that in the last two months demand has increased over what it has been in the last 6 months. Therefore, the current price increase is taking place.

Bad timing on my part in joining, lol.

- Kat

Isablan is making me want to sell off my little private sandbox at below market price (which would still be more than double what I paid for it just three months back ) and then sit back and watch it being sold back and forth .

Fascinating stuff here folks!

I'm reading through with interest... wow.



True enough, in hindsight. I was in an industry that is somewhat related to telecom but not smack in it - if I named exactly what, a few of you might guess the exact company... I'd rather not divulge my RL.

Things run a bit behind in some industries, sometimes about a year behind to 'catch up' to changes in a major industry like telecom - and few leave a path for sane downscaling, when demand is so hot that you can't expand fast enough over the previous 5 years. Nobody else in that particular industry 'figured it out' fast enough either... and these were some smart people.



Hence my worry. We hit 2 million members so fast... is this a bubble here and now?

Ok, so my scale of concern is... well, ridiculously small, but hey, it's all I've got.

I'm operating at about $L 8M per year in second life nowadays - I'd rather be a great $L 10M company for 10 years, than a meteoritic $L 50M operation that crashes and burns by next Christmas.

Market predictions, anyone, and supporting arguments? I'm still soaking up the analysis.

Due to reselling, prices tend to fluctuate a lot. Current market value (money owned by members) will settle things down as long as there ain't a significant increase in new members.

increase in new members seems more likely to happen in the short term (due to continously PR from all).

From statistics we can see that
Logged-in Users
Residents Logged-In During Last 7 Days 227,254
Residents Logged-In During Last 14 Days 335,795
Residents Logged-In During Last 30 Days 541,627
Residents Logged-In During Last 60 Days 821,549

this show that the trend is in the last 30 days we had 120k more users logged in compared with previous 30 days (30-60)
Also the last 7 days of the 14 day period we had 55k more users logged in compared to the previous 7 day period.
The trend is obviously upwards

another indication is the land that was put in auction
acres auctioned
1436 november
236 December (MTD) ---> if continues with the same tempo, we'll have in total for december 472

Those 2 together says clearly that for the moment we have to see were the prices (even with the resellers game) will be stabilized.

And also we have to think that Linden Lab has somehow to be profitable. If we expect that they will keep puting out free land to cover all the needs for new users, then they need to give 4-10 sims each day just for free land. And since they will try to find some ways to keep things under control, then it's reasonable to consider that it's much more easy to them to reduce a bit the supply , so they make more money from auctions and they don't spend in a linear way their resources and servers.

We should also expect some time in the future the same land tier for mainland and private lands which will give a push up to the prices.

The only thing we miss is if the land mini crass will come much earlier than this.
I respect bubbles, but from what I know, after a bubble there is a period that things calm down and then here we go up again. And while we are talking for bubbles, it's 2005 when Murdoch buys myspace.com for 0.5 billion US$ and 2006 when google buys youtube.com for 1.2 billions. I am not quite sure if google guys believe that all this is just a bubble.


In SL the mini crass will come when the resellers realize that can't sell their land and in front of the panic in paying monthly fees, they will try to sell cheap as they will not loose everything.

And my friends, i wish i could be there and to have some money at that time to buy some cheap land.

Very interesting post, ty!

Not to forget tho, before everyone panics There's a fixed price for a 65k land ($195 per month). So in fact we have a maximum price per acre as it is for now. Meaning, a 512 parcel always have a maximum price (or nearby, market will regulate that).

So to make land-prospecting even more complicated it's all about how fast Lindelabs reacts to the number of members joining. Everytime Linden reacts to a certain increase in members they will release a certain amount of land to level the demand.

During the reaction-time there's a gap for resellers (or everyone) to react. As soon as Linden reacts we'll see a drop in land prices, which will then accumalate until next land-drop. So land-reselling isn't that hard really. Buy when it's cheap, sell when it's high.

Too bad everyone allready knows

Yep Brazil, you're right - if land prices do fall rapidly, treat it as a potential buying opportunity.

I tend to agree, especially that the economy is one of the most interesting things about SL.

Remember in the early 90s when RL real estate prices began to climb? Lot's of people thought that was a bubble, too, but it didn't turn out that way. (I know, I know, we could still see a price correction, as opposed to a slowdown, depending on what interest rates and the economy do, but even a 20% correction would still leave many people ahead who bought even as recently as 3-4 years ago.)

My own position seems to be different from most of the posters here so far. I quickly jettisoned my First Land because I found the mainland equivalent to living in the slums. People like to bash Anshe Chung, but I realized fairly quickly that in creating zoning regulations she's catering to people like me. I'm happy to pay more for land that has a reasonable hope of still looking decent once it's populated. And I suspect I'm not alone.

My theory, supported by nothing other than personal observation, is that a large segment of the population is moving to the suburbs in the same way that Americans began to do in the 50s and 60s, leaving inner cities -- the mainland in SL terms -- to decay. Not because they can't afford to live in the first-settled areas, but to get away from griefers, needy noobs, bad building and its attendant ugliness.

Demand is still high on the mainlaind, of course, but as a poster above said, that's probably because many don't want in invest very much until they're sure they're going to hang around for a while, and the best place to find a tiny parcel is still on the mainland. But I think there is also a significant subset of the population that gets away from the mainland as fast as it can. And I think the trend will continue, if not accelerate, as long as the Lindens allow chaos on the mainland in the name of creativity.

So apart from unrealistic/speculative pricing, my guess is that prices will continue to rise even more in the burbs than on the mainland.

Great thread.

Theres been several 512's for sale in our sim for $4899 each no ones touched them in months, so the price went up to $8988 today so wondering what makes sellers think that anyones going to pay that price??

No land in auction today at all, but i see purple land all over the map. Seems LL is playing the land price game to me, but then thats just my oppinion.

Am looking for a reasonable half a sim or so, but good lord im not about to pay those prices.

hm in my opinion LL should lock down land sales til all the servers currently not fully bought get bought

I find it pretty hard to believe 512's were for sale for 4899 for months. Unless there was some problem with the search tool. For a start I've been paying over 5000 for 512's for weeks now. If I put up a 512 now for that price it would go in under 10 minutes, guaranteed.

In the first part of November we had a 1024 marked at $6500, it sat for 2 weeks unpurchased, till i lowered it to $5600, so it hasnt been so long ago that the prices were MUCH lower. We paid about $3500 for 512's in the sim that our condos are located in about that time, and about the next weekend the prices in the sim started going up and that clump of 512's in Hazeltine were priced at $4899, this last week they went up to $8998..not sure if its the same owner or if a land baron bought them for resale. Actually i think its the land barons driving the prices up and i can only hope this all blows up in their faces.

It will be interesting how the Bragg case pans out as it will have a bearing on all land owners here imho, heres an interesting article i saw posted:

http://www.informationweek.com/news/showArticle.jhtml?articleID=196604327

Yeah they really deserve it.

Before the price hike of the Private Islands, the land barons profits by pricing themselves between the land tier gaps.

After the price hike, they can no longer afford to give renters the same level of tier discount as before. This makes mainland ownership attractive again. One way to counter act that is for them to increase the "purchase" price of mainland.

That alone is not enough, in order to prevent price being dragged down by influx of first land, alts are being used to swallow up all the first land. This has forced LL to stop releasing first land all together.

So mainland release is now all from auction only, and they are all being swallowed up by the barons again.

So what if anything can be done about this?

In the long run, once LL supply has catch up with the demand, or rather to the level that artifical manipulation of the market by big players no long make economical sense, price should ease up.

Chances are, first land is the thing of the pass so long open enrollment remains.

I know nothing but I think it's highly unlikely that private island owners are manipulating the mainland prices. Most of the people I see buying land now are the same ones who have been doing it for months. Also to push the minimum cost of land from 13.67 up to 14.00 would cost about L$500,000. That's a pretty serious chunk of change for such a minor move. Not to mention the fairly significant risk.

Again I know nothing but it seems highly unlikely that Land Barons buying up first land would cause LL to stop releasing first land, rather than the more logical move of releasing more.

This month 365*4096=1,495,040sqm of land has been auctioned off. That doesn't include first land. There's only a couple dozen (at most) serious land traders right now and they are NOT sitting on 1.5 million sqm of land. They're flipping it fast to end users. That is to say normal people like you are buying land at these prices. There's not some secret cabal of land barons hording land. Simple truth is the population is increasing way faster than the land supply and new players are willing to pay these prices and more.

You are right about one thing. If LL increases supply to exceed demand then prices will drop. Of course, LL has an incentive not to increase supply. If they can stabliise prices here then suddenly all those sims they auction off are worth twice as much as they were two weeks ago. LL have the most to gain or lose on land prices not land barons eking out 1 million dollars over 5 years and ten employees. LL are also the ones that completely control the price by controlling the supply.

Oh, one more thing I'm not sure how "open enrollment" affects first land since only people with credit cards on record (or paypal) and signed up for 9.99 a month can buy first land.

Well, here's an easy solution: First Land can't be sold or transferred for six months. If you cancel your account before the expiration, you get your L$512 back.

There. Linden Labs can have that one for free.

If I may be sarcastic for a moment..

The people who consider SL land the equivalent to RL land are probably the same people who pay to have a star named after them and assume that they own that star.

I see SL as sharecropping, leasing, what you will. LL is offering a service, in the form of a game, and we are paying LL for use of their servers and hard drives and databases for our own amusement.

As far as the basis of the lawsuit, if Bragg purchased the virtual land through fraudulent means, i.e., using an unintended exploit or vulnerability in the SL code, then the sale should be null and void. If he purchased the virtual land thorugh legitimate means and LL arbitrarily took it away from him, he might have a case.

Perhaps a RL equivalent is if a land baron paid off a government official to make them the owner of the land w/o the landowner's permission? Would that be upheld in court?

If their analysis is true, and SL users do not own virtual land as they do RL land -- after all, LL owns SL, nobody owns the planet Earth -- and land prices fall, it will most likely hurt the land barons more than the average user. It would more likely help the average user by making land more affordable. How it would affect the LindeX, I don't know.

Another way to lower land prices is for LL to introduce "eminent domain". If a land baron wants a plot of virtual land and the owner does not want to sell or is selling for an above-market price, they can convince LL to force the sale for less than asking price or even less than market price.