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by stoppingin
1262 days ago
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> This is prudent pipeline management... Doesn't this contradict your central thesis? If the supply of housing doesn't exceed the demand, the price isn't going to drop. How can urban consolidation actually benefit the renter class if property developers are able to artificially increase the value by restricting supply until mechanisms like immigration cause demand to catch up? |
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No. In development-constrained world, particularly one with long approval timelines, you need to make money on margin. In a less-constrained world, you can bring to force economies of scale and make money in volume.
The thesis is: if you have an anti-development environment, developers will maximise margins. This isn’t a conspiracy and it isn’t artificially increasing value. It’s survival. If ten houses will get built but there is demand for twenty, and everyone pays the same for labour and materials and lobbyists, all those houses will be as high end as the market will bear. You’re competing in getting the right to build; the market is inelastic. If anyone can build twenty or thirty houses without years of approvals, you’re going to prioritise your costs, because there is a chance you don’t sell every single house. You’re competing on price and value; the market is elastic. (You also get a learning curve.)
This is why Sydney has price inelasticity for detached housing. The scarcity is a policy choice.