3 ms·
The value is in the land, not the house. If you own a plot of land with a single family house on it, and suddenly someone is able to build an apartment building
by imgabe 3y ago
The value is in the land, not the house. If you own a plot of land with a single family house on it, and suddenly someone is able to build an apartment building on that piece of land, it will actually become much more valuable because an apartment building generates much more revenue than a SFH. They could easily sell the land to a developer and retire somewhere else.
- rcxdude 3y agoIt's not obvious that would stay fixed: depending on the dynamics of the market, it could go up, it cold go down (The demand is for housing, not land. If you manage to increase supply for housing sufficiently by increasing density, then the value is the land could go down even if you could build many more homes on it than before). I agree it's not certain that it would go down, however.
- deleted 3y ago[deleted]
- beaeglebeached 3y agoIt becomes obvious as housing density approaches infinity. Why would anyone buy your land for housing if they need one tiny spec to house a billion? This is simple supply and demand, high density housing lowers land value, as price isn't determined primarily by potential utility .
- rcxdude 3y agoSure, you can always make an obvious argument at an extreme, but then you need to demonstrate that the extreme is relevant (like, the function is monotonic, not very common in economics).
- beaeglebeached 3y ago[dead]
- deleted 3y ago[deleted]
- beaeglebeached 3y agoWhy on earth would apartment builder buy my land specifically for housing when they can dump a mega apartment complex anywhere? This is simple supply and demand. As density limits rise, housing land demand lowers. In the extreme of infinite density, demand goes to zero, as everyone can fit in a pinpoint and we don't need other land for housing. We get the opposite as your prediction as everyone lowers prices hoping to undercut to get the single pinpoint bid.