Can you make real profits in a virtual world?

With global property markets looking increasingly shaky, it seems there are few places left where investors can still make money. But the same desire to own bricks and mortar that took investors to the bleakest parts of eastern Europe is now driving them to another obscure emerging property market. Prices in this location are booming they rose by 24% last December alone yet even first-time buyers can still get on the ladder. The trouble is, none of it is real. This boom is happening in Second Life, a three-dimensional online world where people create avatars' virtual versions of themselves who lead lives within the world and trade using the in-game currency, Linden dollars, which are exchangeable for real world money. "After a player creates his or her avatar, he or she then talks with other avatars. One thing leads to another and, just like in real life, they buy houses," says Jim Rossignol of PC Gamer in The Daily Telegraph. Land costs anything from £10 for a plot to £2,500 for a private island, while renting starts at about £1 a week.

And just like the real world, there are plenty of people willing to speculate on property. Ailin Graef became the first Second Life millionaire last year when she made $1m buying virtual land, developing it, then selling the homes for a profit. On a smaller scale, British member Pauline Woolley has set up a monthly virtual homeowner magazine. "My husband said to me, Let me get this straight you have created a virtual magazine to give virtual people advice on virtual furniture to put in virtual homes and expect to make real money?'," says Woolley. Her husband's confusion is understandable, but enough users are turning a profit to cause the Inland Revenue to wade in. "The same tax rules apply to internet trading as to any other form of trading and our compliance approach remains the same," warned a spokesman in The Sunday Times recently.

But before you rush for your laptop, remember that, "while there are people who are making money online, it's unlikely that the majority of gamers will turn a profit from virtual endeavours", says Rebecca Armstrong in The Independent. Those who do make money are either buying land and developing it, or designing furniture, which requires significant computer-programming knowledge. And profits for most aren't huge in July, only 145 players earned more than £2,480 on the site although that's up from 116 in February.

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If you do buy property, there is a chance the price will rise. The number of players on Second Life is set to grow by a third in the next four years and the supposedly infinite land has been known to run out. December's astronomic price rises were down to a temporary shortage when the company behind the game, Linden Lab, had to commission extra servers to expand territory within the virtual world.

But buying property in Second Life is akin to buying in the least-developed world market you can think of. "It is a little bit like the Wild West out there at the moment," Piers Harding-Rolls of Screen Digest tells The Independent. Virtual buyers have the same problems as real-world buyers devious sellers, unsightly developments on neighbouring plots, badly-built homes all without any rules to protect them. "Property disputes are already common and increasingly spill into real courtrooms", says the FT. Last year, Linden Lab was sued by a man who accused the firm of seizing land he owned. Then there's the currency issue the Linden dollar could conceivably collapse if inhabitants become worried about its value there was a run on a virtual bank earlier in the year, around about the time Northern Rock was in trouble in the UK. And, of course, there is always the chance that Linden Lab could go bust, destroying your entire property portfolio. If you're up for that kind of risk, better surely just to buy into Zimbabwe.