Supply and demand is a classic consideration in real estate.
However, there are unique things to be taken into account when
considering the supply rate of the real estate market.
Real estate is not an easily manufactured commodity. Nor is it
possible to simply produce new housing units instantly to meet an
increase in demand when it occurs. Likewise, it is simply not possible
to produce more land or more space as needed to meet an increase in
demand for a specific area.
There are some things regarding the supply of real estate that are
universally true, and that are easily understood from a basic economics
standpoint. An oversupply of housing in a given area typically means
lower prices. Likewise, an undersupply of housing in a given area
typically leads to price increases for that housing.
This rule can also be applied to specific areas of real estate, such
as types of housing. If there is an abundance of certain types of
housing units, such as flats, but residential properties are in short
supply, then the prices of flats can be expected to be much lower than
that of residential properties, even if they are in the same area.
However, on the whole, it is important to understand the
location-based nature of real estate when it comes to considering the
supply rate of real estate in a given area. As certain neighbourhoods
increase or decrease in popularity and residency in that area
experiences a corresponding increase or decrease, the supply rate can be
expected to shift accordingly.
Paying attention to these shifts can better enable an investor to
predict pricing fluctuations in the housing market of a given area,
especially once they can take note of trends in residency within certain