The typical premium names take 100 years for someone "to want to live in it", the name would have to absolutely exceptional for the above to really be anywhere near how things really are. For example if you put up a house for sale at auction in Toorak you'll get numerous people bidding around the "enduser" price. Put a domain up for auction, even a very high quality domain, and you'll likely get zero people bidding at that enduser price. The people bidding be resellers paying a faction of what an "owner occupier" might pay.
Snoopy I agree that domain auctions don't naturally attract end users and thus take a lot of time to sell which can make them an unattractive investment for some (especially if you've wrapped your capital up in domains that aren't attracting interest).
That said, despite the illiquidity I think this intrinsic value of a domain is FAR higher than property.
The way I see it, the people buying a domain are buying a vacant block of "land" and the website is the "property development".
Land closer to the CBD and inner suburbs gets a premium price because there are more people wanting to be closer to where they work and socialise (as well as being able to build bigger buildings on the land ie multi-story apartments).
Most property developments in capital cities need to allocate anywhere form 20% - 40% of their development total costs to the purchase of the land.
Completed property developments at end user prices typically yield around 4% - 7% return pa (ie via rents)...
How's that compare with a premium domain - well to keep land to development costs even a $3000 domain with $7000 development costs - in my experience could very easily bring in an extra $10,000 to $100,000 (ie via profits), giving it a yield well over a 100% - 1000% pa IF you are the end user...
The problem is property being ubiquitous and durable means that there are 10 million potential buyers (end users) who can make an 4% - 7% yield on the property so prices are stable and the asset is liquid, where as with domains there are probably 10 - 100 potential buyers (end users) who can make a 100% - 1000% return pa, but with so few buyers prices are unstable and the asset is illiquid.
Based on these figures the market is indicating that a domain investment is 20 - 200 times more RISKY than a standard property development.
Obviously I feel the market is pricing in too much risk, but for me the most disappointing thing is the lack of wholesale liquidity (because at one point this was close to being achieved with NFs AMA) because without it a domain investment becomes more like a "sunk cost" rather than an "asset" and I believe that improved market liquidity alone would push up the value of all AU domains.
And it's a relatively simple problem to solve if the industry was willing to work together as it really only requires all wholesale buyers to congregate together on a platform that also allows domain owners to auction off their domains with the confidence that wholesale buyers are always present at the auction.
