[KoenDG]

Commercially backed mortgages. The reason it doesn't work the way you're describing.

Supply and demand do not exist in a vacuum.

There's no _immediate_ response to people not being willing to pay a certain amount.

Owners, and especially individuals or companies that own large amounts of housing, will refuse to lower prices, regardless of demand dropping. Be it actual demand, or people staying away because the price is too high.

Because they have the power to do that.

I invite you to watch these little documentaries on new york city: https://www.youtube.com/watch?v=Zjd1WNhGliY&list=PLkVbIsAWN2...

Where store spaces have not been rented out for sometimes a decade, because owners consistently refuse to lower prices. Just refusing to lower rent, for years on end, and being empty that entire time.

And if you ask why, the answer is: commercially backed mortgages.

It's simply: you take a loan with a bank for, say, 10 million USD. You're required to pay this loan back over a period of 10+ years. The bank, meanwhile, sells this as an investment product. The bank uses their own funds to guarantee the profit this loan is going to generate, and attracts investors to take a part of it. Thus gaining them a % increase after X years.

However, this means that you can't ever lower the amount you have to pay back, if the value of the physical good your property is based on, drops.

Price isn't dynamic in a pure sense. There's a person on the controls and if they refuse to move them, even if you think it's illogical to do so, they're not going to budge.

Because they have a loan to pay back. Over a finite amount of years. And lowering rent means longer time to pay back the loan, meaning breach of contract.

There are far more systems in place than many are even willing to consider. For it assaults their idealized worldview.

Be it shop or regular housing, this is a system that artificially stops prices from dropping.

[qeternity]

Yes and no. Yes, property investment and speculation and inflate prices beyond their consumptive utility.

But no in the sense that commercial real estate investors are a small chunk of the global RE market. The vast majority of residential property are owned by the tenants. We have turned housing into the largest retirement fund and don't have a way of undoing that. And we have exacerbated this by deciding to push interests rates artificially low so that all sorts of people who otherwise would be priced out of home ownership, are now part of the demand curve competing against the same supply curve.

[dorgo]

>Because they have a loan to pay back. Over a finite amount of years. And lowering rent means longer time to pay back the loan, meaning breach of contract.

I don't get it. Refusing to rent out the property means even longer time to pay back the loan, doesn't it? It can't be the reason.