4 ms·

This is exactly right. Like most things, looking at topics as "supply and demand" enables the right understanding. New luxury construction takes demand (and thu

This is exactly right. Like most things, looking at topics as "supply and demand" enables the right understanding. New luxury construction takes demand (and thus dollars) from the next-best-thing so it becomes less expensive. That enables the people who previously could not afford it to seek it, which makes the next-next-best thing less expensive in turn. The flip side of this is when demand outstrips supply, so you have people paying several thousands per month for a studio in a walkup in Hell's Kitchen. But to be very clear, it would cost even more if not for the new high-rises within that square mile.

rickydroll 3y ago
that's true you don't think that housing is subject to induced demand. I think more housing built in an area will increase the demand for housing in that area. It'll never stop. another way to look at is why should someone drop the price on the property if adding new housing doesn't decrease demand. one could make the case that building new luxury housing will free up the expensive housing for people that still can't afford it.
- xyzelement 3y ago
  If demand is really infinite then your logic applies but I see no reason to think that it's the case. How does building new buildings increase demand? Only by making housing move available and thus dropping the price. In other words, I am either in the market for a $5M apartment on Park Ave or I am not. If a new building gets built, it doesn't make me go "well hmm, I never thought about living in NYC, but now that there are 50 more apartments available, I think I will". What DOES happen is that ~50 people who were previously competing for the same handful of pre-war buildings now just bought into this new place because it's nicer. All of a sudden there's less buying pressure on the existing inventory so the seller has to drop the price (ie, if ppl aren't buying my apartment because the same $5M can get them new construction, maybe I gotta drop it to 4.7M)

rickydroll 3y ago

that's true you don't think that housing is subject to induced demand. I think more housing built in an area will increase the demand for housing in that area. It'll never stop. another way to look at is why should someone drop the price on the property if adding new housing doesn't decrease demand. one could make the case that building new luxury housing will free up the expensive housing for people that still can't afford it.

xyzelement 3y ago
If demand is really infinite then your logic applies but I see no reason to think that it's the case. How does building new buildings increase demand? Only by making housing move available and thus dropping the price. In other words, I am either in the market for a $5M apartment on Park Ave or I am not. If a new building gets built, it doesn't make me go "well hmm, I never thought about living in NYC, but now that there are 50 more apartments available, I think I will". What DOES happen is that ~50 people who were previously competing for the same handful of pre-war buildings now just bought into this new place because it's nicer. All of a sudden there's less buying pressure on the existing inventory so the seller has to drop the price (ie, if ppl aren't buying my apartment because the same $5M can get them new construction, maybe I gotta drop it to 4.7M)