If it is just a matter of supply and demand, how come that increase in house prices have outpaced population growth by huge margins in many places? I mean look at places like, e.g. Germany which has a pretty stable population (it would be contracting if it wasn't for immigration), but house prices increased significantly over the last 10 years, pretty much throughout most of the country.
I don't know details about Germany, but you can't just look at national population trends. In the US for example, the problem is made worse by a trend of people moving from rural areas into cities.
And re the "huge margins" the relationship between supply and demand isn't linear. If you have 10% more households than homes, bidding wars will drive prices up way more than 10%.
There are several reasons; here’s a few, some US specific:
1. While the overall population may not have increased significantly in some countries, people have been migrating to cities from rural areas. This influx puts price pressure on urban housing. The US, for instance, likely has enough housing overall, it’s just spatially misallocated. A derelict, vacate home in Detroit doesn’t help someone in SF.
2. Many forms of denser housing are now illegal or have been torn down. Boarding houses are gone for instance. Boarders now compete for studios or one bedroom apts.
3. Smaller family sizes. It’s no longer common for a six person family to live in a three bedroom house. This used to be commonplace. Those six people are now two couples with a child each.
4. Related to point three, governments have made it illegal to reconfigure or replace larger homes with smaller homes more appropriate for smaller families or empty nesters. Think of the retired Boomer living in the 6 bedroom single family home, or the childless couple in a three bedroom condo with two of bedrooms being an office or guest room. Closely related, people often demand more space than they did 80 years ago.
5 This a big one: higher urban wages. After decades of wage stagnation, wages have been going up, especially in places like SF, NYC, and Boston. This is a GOOD thing. Not so good, is that these same places have kept their housing supply relatively static, forcing those with good jobs to compete amongst themselves for housing. The old joke: VC $$$ ——> Startup —-> Developer ——> Landlord, has a lot of truth to it.
