House Price Bubble and Domain Names

During the past 10 years we have seen staggering house price increases, especially here in the UK. There are thousands of 2 bedroom flats (with laminate flooring) around the country priced will in excess of £250k - that's half a million dollars. Usually in previously down-trodden city centre locations, with the promise of "city living", they were snapped up off-plan by the naive and gullible. What was worth £50k only a handful of years ago is now out of reach to everyone on an average salary.

But times, they change.

The implosion of the credit markets has suddenly cut off the supply of low interest , easy to get credit that inflated these prices. And those stuck with them are suddenly seeing that they overpaid and have to deal with the consequences, whilst the banks cover their assets.

So how does this compare to domain names? Well, like any other item, domain names can be hyped up to massive value, sometimes beyond what would be acceptable. But don't confuse this with the dot com crash, or the current houseprice crash.

Good, generic domain names are still massively undervalued, and unlike property, they actually EARN money whilst you have them. Put it this way - you buy a brand-new, never before thought of domain name for £5 or £6. That covers you for two years ownership. Before the day is out, you could have a website on the name, or point it at a parking service. Every advert click, or affiliate purchase is money in the bank.

An example. I registered GardenSofas.co.uk last month. April 13th to be precise, so actually under a month. Already it has paid for its registration fee, so the next two years are effectively free. And this is on PPC adverts only, no affiliate sales yet. But when an affiliate sale takes place, that will add massively to the pot.

This is an average domain, in a niche market. But turning a profit with no advertising, and just a little management to ensure it doesn't get spammed out of existence is quite nice.

If you decide to buy a more expensive aftermarket domain name, then the numbers will be different, but you could make thousands of pounds per day in revenue. I bet a city centre flat doesn't do that.

I'm not saying go out and buy a domain name for £250k - although a lot of people do, but do include the possibilities of domain names in these uncertain times. The ability to receive an income from such undervalued assets is not generally understood by traditional investors, so now is a very good time to get involved.

And a key point. If someone wants to buy a 2 bedroom flat in the middle of Manchester, they have the choice of the market. Sellers will bid themselves down to get rid of their rapidly depreciating asset. If a business wants to specialise in Garden Sofas, then there is only one generic name that will do. And it ain't going down in value.