Friday, Mar 05, 2010
Basic education for the mainstream
Aboutproperty: Property price falls 'not caused by supply and demand'
Supply and demand has nothing to do with falling house prices, it has been claimed by one expert.
Prices fall because people cannot afford to buy, not because there are not enough properties on the market or buyers are not interested, explained Paul Holmes, chief executive officer of first-time buyer advice firm Firstrung.
"The reason they can't buy a property is because the speculative mortgage product has completely disappeared," he commented.
"They can't afford to buy because there is no more cheap money available."
Posted by dill @ 02:49 PM (784 views) Add Comment
3 Comments
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1. cat and canary said...
True for the UK,
The recent rise in house prices co-inciding with the dropping of interest rates to 0.5% is strong evidence for this
If the only way to buy a house was to save up the cash, then it would be pure supply and demand driven. But when you are spending borrowed money, the value that you borrow becomes fluid.
Gordon knows this. We know he knows it.
2. mark wadsworth said...
Oh dear. If people want things and have the money to buy them, there is 'demand'. If they do not have the money, there is no 'demand', however much people may want things.
3. Vivaldo said...
Obviously they don't understand that actual demand constitutes both the desirable and ability to purchase a good ...
just the desire to purchase without any means to pay for it is "aspirational" demand.
Funnily enough economics has a lot to say about the former and very little to say about the latter!!!