The Next Real Estate Bubble

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The guy who paid £13,700 (real money) for a virtual island is apparently doing quite well as a real-estate investor. So well, in fact, that he's already made his money back. And he's not the only one looking to set up a regular cash flow from land:

Last month, another of Entropia's virtual properties - a virtual space station - sold at auction for £57,000.

...

While the real housing market may be somewhat static, the one in the virtual world is booming, said the space station auction winner, gamer Jon Jacobs, AKA Neverdie.

He said the virtual real estate market was "on fire" as gamers increasingly realised that virtual worlds could start to compete with real worlds at an economic level.

Well, I don't know about that last statement. After all, online real estate doesn't face the constratint problems offline real estate does. Scarcity and distance from desireable neighborhood properties, namely. In fact, I don't even think it's the real estate thing that's of real importance here. Instead, what the players have done who buy the islands and space stations is to get around a variation of a problem mentioned by the folks at Terra Nova.

The lack of a strong service economy in the online world is in part due to the lack of player-based contract enforcement. (Hassling other players online when not in specific "player-vs.-player" areas is known as "griefing", and is usually an offense that can get you suspended by the game operators.) However, the ability for individuals to get mutual gain is often enforcement enough (weak thought it might be), and it appears that the real strength of the real-estate purchases is not that the "land" has some instrinsic value derived from scarcity, but rather its ability to facilitate player-to-player service transactions such as hunting and mining rights.

1 Comment

As I see it the bubble has already been created and it is very much in India. Being an Architect in one of the fastest growing cities in the country, I can see the real estate bubble very much present and even so not prepared for it to burst.

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This page contains a single entry by published on November 10, 2005 9:55 AM.

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