Quote:
Originally Posted by CaptainYooh
YI disagree with the highlighted statement in your second paragraph. Increasing costs of land and construction drive the prices up when the demand is there.
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As SebC alluded to, you have it backwards. Increased demand drives the prices of land and construction up, not the other way around. The price of any good in a market system is set by how much people are willing to pay, and not by cost of production. The only thing that stops goods from being sold for less than their cost is that, in the long run, companies that do so over a wide product range go bankrupt.
You can buy timeshares in California right now for the cost of assuming the back taxes, or, essentially free, as tax is incidental to market price. The cost of production has no bearing on that; the reason being that the market has very little demand and a huge oversupply. If someone perfected cold fusion tomorrow, and oil lost its central place in the economy, you would see house prices in Calgary deflate precipitously, and the price of new housing drive to zero regardless of how much it still cost to build.