Factors Causing House Prices to Rise

Factors that lead to an increase in housing prices are advantageous factors in the real estate market. In general, the price of the housing market has risen in the past decade or so. Between 1985 and 1989, the housing market grew rapidly, up 20% over the previous year. However, in 1990, the real estate market price showed a very large decline, the rate of change rose to 0% from 35% in the previous year. From 1990 to 1995, house prices no longer rose.

Housing prices continue to rise today as well. There are many potential factors behind the exciting price. According to McCarthy and Peach (2004), one of the reasons behind the rise in housing prices is the speculative bubble in the asset market. This situation could be a potential threat as the asset market could further impair the collapse of the US economy. Considering the small island, Long Island located 32 km (32 miles) from downtown Bangkok, the median house price in 2000 was 199, 800 dollars. The town of Dicks Hill in Long Island was 56 miles from Midtown Manhattan and the average house in 2000 was 386,100 dollars. Please explain why these facts are inconsistent or not contradictory to the standard "urban land theory" developed by economists such as Kane and Alonso.

The first factor that affects housing supply is rising land prices. Supply will fall if housing supply becomes more expensive, which leads to price increases. This is because market demand is excessive and housing competition becomes intense. Today, the rise in costs is due to the fact that land prices are rising, especially in popular areas such as London and Manchester. In addition, as the profitability of the housing market increases, it becomes more difficult for local governments to obtain planning approval. This increases the construction costs of the land and therefore reduces the supply capacity. Another factor of land supply is government regulation. For example, the green belt is strictly restricted to the land of the building. As the government increases green spaces it is becoming increasingly difficult to find sustainable lands. This leads to a decrease in housing supply, which in turn leads to excess supply.

Reduction in supply can be due to higher commodity prices, higher production factors, a reduction in the amount of resources available for production, and regulation and climate conditions. Figure 6 shows the supply reduction when the supply curve SS moves left to S1S1. This increases the equilibrium price (0PE1 to 0PE2) and the amount of equalization decreases (from 0QE1 to 0QE2). Reduction in supply means that companies can delightfully supply certain amounts at a higher price than before.