Archive for March, 2004

House prices

Tuesday, March 2nd, 2004

If prices are fixed by supply and demand, then seeing as the population of the UK for example is stable, and houses last about 500 years and only cost about 100k euros to make, why should I have to pay for one at all let alone 3 times their material value. If we were talking about video players, once everyone has a video player, if video players don’t break and no more people come into the system, you can’t sell videos. This is the case with houses – houses don’t break irreperably and their maintenance costs are not a significant fraction of their purchase costs. So surely their market value should be virtually zero. In Italy, where the birth rate is 1.2 children per couple, people should start paying me to live in their house soon. So what is the economics behind that?