Why the price doesn't affect the demand
Published 25/10/2015 | 02:30
Agent reaction to proposed rent control measures has been mixed, much like the political reaction. In an article written by Dublin-based estate agent Phil Thompson, of Des Lalor Auctioneers, Mount Merrion, entitled 'The case for rent control', Thompson explains that: "One of the foundational laws of economics is that, in a free market, price is set by supply and demand. In a situation where demand exceeds supply, price rises. This stimulates increased supply and dampens demand, bringing prices back into equilibrium. The problem in the property market is that people have to live somewhere. Thus price variation does not change demand. Instead, demand is governed by population changes."
Thompson goes on to explain that supply is a particularly unresponsive factor given the length of time involved in the Irish planning, financing and building process, and he attributes this lack of responsiveness to the type of socially-damaging boom/bust scenarios that we have seen over the past decade.