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Chris, you're quite right that changing the stock of a highly durable asset takes time, but that doesn't mean it's worth doing. By analogy, cutting carbon emissions for one year only wouldn't have much of an effect on climate change, but sustained cuts definitely would. The fact that these changes are not immediate probably is a reason why it's hard to generate enough political support for them, but that's a different argument. The fact that investment expectations seem to be an important factor in housing demand is reason to be sceptical about effects derived from comparing stock levels to prices. Investors expect prices to continue rising in part because supply is so constrained, but if government could suddenly and credibly commit to a much higher supply those expectations would be undermined and housing would look much less attractive an investment. Again, there are clear reasons why governments can't or won't make that kind of commitment, but that's very different from saying that "supply doesn't affect prices".
Toggle Commented Oct 17, 2017 on On cutting house prices at Stumbling and Mumbling
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Oct 17, 2017