House value as determined by population density

[microsquid]

Apologies to the mods if this belongs in STB... (although I'm not sure I have access to that one)

I've had an interesting discussion with a few friends and I just wanted to see the wider opinion on it.

I'm lucky enough to own my own house in Ireland, my friend has an apt. in Holland and others are still stuck in the saving loop and praying for negative equity (nasty opportunists that they are )

The point that was made that I wanted to throw out to AAM was this:
"Just did some figures there and used wiki and some financial pages as my source.
The population of the UK is 59.8 million and the land area is 244,820 km2. That gives you a population density of 244 people per km2. For England alone, it works out as 384 people/km2.
The average house price in the UK is approx €280,000.

Irish population density is 58 people/km2 [4.1 million in 70,273 km2] and our average house price is only slightly lower [approx €250,000]. Can somebody explain to me how having a population density over 4 times lower than the UK makes for a sustainable price level at just below the UK level?

Holland has a population density of 392 and Belgium is 340. As I understand it (and please correct me if I'm wrong), houses prices are not markedly different to Irish house prices.

[...] In [the suburban area around Rotterdam] you'd pay 200K for something really decent with a garage"

The rest of our offline rant considered reasons for why that might be so, variations on the IT property supplement "take 5" section, whether or not it would be a reason to pop, etc. etc.

Anyone else got an opinion?

 

[ClubMan]

I don't think that there's necessarily any meaningful correlation or causal relationship per se between population density and house prices. Supply and demand determine the market prices for property as with any other asset. Maybe there's an argument for there being some correlation/causal relationship between population size/density and demand but I'm not sure what, if any, research has ever been done on this.

 

[runner]

Yes, simply started I think property values are driven by 2 main factors
a) Availablilty.
b) affordability - can people afford the mortguage on their salary.
There is no correlation I would think with poulation density in the EU anyway.

 

[woods]

Perhaps you should look at it in relation to zoned available land. I have just been told that the planners in Cork are so alarmed at the recent rise in the cost of zoned land that they are going to zone lots more of it. Perhaps this will stop the spiral.

 

[microsquid]

Well that'll make the people down here a bit happier... or not maybe.

Obviously standard market forces of supply and demand would decide the price in a completely free market but my query is "how can demand be so high when we have more available land per person than the other countries?". Even with zoning. They have environmental law in Holland, too. I was away for a few years and the amount of building on formerly pristine vistas of countryside... but thats for another rant.

We're building like crazy and we still haven't supplied the demand so you begin to wonder why there is so much "demand" in a country of only 4.1 million.
Did the entire country decide to move out of mammy's home in the last ten years?
People are buying into this and getting a mortgage at a higher monthly payment than they would pay to rent in the same development, buying in the belief that rents will go up and house values with them...
People did the same with equity in the 90s.
Is the 'demand' a real demand from people of shall we say 'house buying age' (in line with the birthrate bulge around the 70s/80s) or is it driven by an Irish obsessive spiral with property?
If it was a real demand wouldn't we see rents rising at a comparative rate?
If it is a spiral, can it last?
We keep hearing that 'the rate of increase is decreasing' - (to no real effect that I can see...) will we ever see a soft land or plateau?

Sorry to sound like Jonah, I'm just throwing questions out there...

 

[bearishbull]

Well that'll make the people down here a bit happier... or not maybe.

Obviously standard market forces of supply and demand would decide the price in a completely free market but my query is "how can demand be so high when we have more available land per person than the other countries?". Even with zoning. They have environmental law in Holland, too. I was away for a few years and the amount of building on formerly pristine vistas of countryside... but thats for another rant.

We're building like crazy and we still haven't supplied the demand so you begin to wonder why there is so much "demand" in a country of only 4.1 million.
Did the entire country decide to move out of mammy's home in the last ten years?
People are buying into this and getting a mortgage at a higher monthly payment than they would pay to rent in the same development, buying in the belief that rents will go up and house values with them...
People did the same with equity in the 90s.
Is the 'demand' a real demand from people of shall we say 'house buying age' (in line with the birthrate bulge around the 70s/80s) or is it driven by an Irish obsessive spiral with property?
If it was a real demand wouldn't we see rents rising at a comparative rate?
If it is a spiral, can it last?
We keep hearing that 'the rate of increase is decreasing' - (to no real effect that I can see...) will we ever see a soft land or plateau?

Sorry to sound like Jonah, I'm just throwing questions out there...

population density indicates the potential amount of theoretical building and indirectly points in the longer term to ability to satisfy demand.
but at present ireland have less housing units per thousand citizens than uk eu etc,but we will catch up in next few years and then it should be interesting!
if you compare england ireland we have six times less people per square kilometre which is an indicator of plenty of space to build but many parts of uk are higher density which we are moving towards now.
i read a report by an investment bank saying the biggest cause in house price rises was population growth and income growth(which would include affordability).
there are demographic reasons for most of demand but also people are entering market earlier than they would because "prices will be too high if i wait till im ready" ,add in the large numbers of investors/speculators and you have spirralling house prices but the rises cant go on higher than income growth and population growth unless supply is less than demand for ever.
the threats to house price rise in future will be

supply exceeding demand-the low population density indicates (theoretically) loads of room to expand supply and high building rate(more than germany after World war 2) means supply is catching demand.
demographic changes meaning less demand.
less immigration meaning less demand.
slower income growth meaning less demand.
higher interest rates and ergo even less affordability and less demand.

and yes rents not moving much more than inflation over past 4 years is an indicator of supply meeting demand in rental sector anyway and landlords being unable to pass on the increased costs of ownership.this reflects on the overall housing picture showing theres no massive shortage of housing per se but rather an excess of demand to own from investors and owner occupiers.if there was an overall large shortage of housing then rents would be expected to rise much more than they have.