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 m

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)