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> supply increases until demand is met fully That is a very optimistic view. What I've seen in Finland and UK is pretty much the opposite of what you claim. I
by bostik 8y ago
> supply increases until demand is met fully
That is a very optimistic view.
What I've seen in Finland and UK is pretty much the opposite of what you claim. In both countries the housing supply in growth centers is essentially controlled by a handful of huge developers. In an attempt to make the planning permission system more comprehensive, it has only turned out more complex and expensive to navigate. That means that only the largest operators can afford to work within it.
In both countries we see developers deliberately restricting the speed with which new housing stock enters the market. In UK, the common pattern seems to be to sell a floor or two at a time, while the others are still supposedly under construction. In Finland, the developers literally shut down their sales and rather took a hit in maintenance costs than sell their available stock while the market was too slow.
Your assumption therefore makes a crucial mistake - it stems from an assumption of perfect markets and unrestricted housing supply. In reality neither of those two hold true.
- zeroname 8y ago> In an attempt to make the planning permission system more comprehensive, it has only turned out more complex and expensive to navigate. That means that only the largest operators can afford to work within it. That's exactly what I'm talking about when I say "artificial restrictions". Don't assume that the market players don't want these restrictions, it's easier to sit on past success than fighting for sustained success. Big players always profit (relatively) from regulation, it keeps down competition from below. > Your assumption therefore makes a crucial mistake - it stems from an assumption of perfect markets and unrestricted housing supply. In reality neither of those two hold true. Of course it's an idealization, I'm talking about what would happen to prices if these restrictions didn't exist. Housing supply doesn't have to be unlimited, demand could easily be met, we're far away from any physical limits. You really have to ask yourself, why does San Francisco not look a little bit more like Hong Kong? What would happen to minimum rents if a dozen of residential highrises could be built near the center?