dick smith on why houses expensive, page-36

Hi Verg32

A couple of points here
We are in a supply and demand society
There is a large profit margin in the building and supply system
If less people buy (demand drops) because if the price stays high or goes higher less and less people can afford to purchase

So if the demand drops builders and suppliers would drop their prices to stay in business i.e. absorb the loss
They would do this until they got to the point that they were not making a profit and then they would go on a holiday
No business person will operate unless they make a profit (in the longer term)

This in turn causes the supply to dry up and prices to drop to whatever level conditions demand if it is a 40% or 50% drop then eventually the economy evens out and prices start to rise again whenever this is

Go back in your history books and you will find similar patterns of supply and demand in the economies of the cavemen

The price of land is a manipulated thing like so many other things in our society.
This manipulation is not necessarily vindictive but occurs because of council / government regulations and charges and represents about 40% of the total cost (A Senate hearing high lighted this about 8 months ago as a major problem in lowering land prices
Subdivision is now such an expensive procedure that developers in an effort to get it cost effective have to have very large areas to develop; this also gives them control of available land

As to supply prices go to the web and get costings from other states and countries and compare. Costs in various parts of Australia are very high by comparison.
So the consumer is the bunny at the end of the system and they will charge what they can get away with and use all the marketing ploys to keep their margins high until the prices can no longer be sustained then they adapt to the new market