Diagram under the microscope : property price.

[McDuck]

That's cool McDuck...
In its Inquiry into Housing Affordability back in 2012, the Productivity Commission identified land scarcity, restrictive urban planning, and the time and costs associated with land development and construction as factors constraining the supply of new housing in New Zealand. My feeling is these observations are all still valid with some geographic variation...

Well, there are a lot of boxes in this diagram that I don't fully understand.
Lets put them to the test.

Ladies an gentlemen, start your chainsaws!

[McDuck]

Observation one.

Fifteen boxes.
Read left to right, top to bottom.
No Chinese speakers may not read top to bottom, right to left.
Well, you may, but it's going to get confusing when I talk abut box 1.

[McDuck]

Obsevation 2.

There is a mix of things, some REAL, some IMAGINARY.

Box 5 " number of household : Seems real.

Box 11 "houses for sale" : Seems real.

Box 12 houses being built: Seems real

____

But we immediately run into problems, with the AIRY FAIRY nature of the objects.

Is a household a house, or part of a house, what about a batch?
(I'm getting a very bad feeling about their intelligence and methodology).

A new-build , if it's half done. Is it half a house?

____
This is going to need some serious pruning.

[McDuck]

Observation 3.

Time is distorted in this,

Things from the future and things from the past are all shown in the present.

Lets FREEZE to fix that.

lets freeze the whole equation in the split second of 14 Sep 2020.

[McDuck]

Observation 4.

The diagram has a layering or nesting problem.

BOX 13 LAND SCARCITY, box 14 GEOGRAPHY , and Box 15 REGULATION are at a lower layer,
so can be condensed (for the time being), into BOX 12 NEW BUILDS.

This whole diagram is a mess!
But I'll press on.

[Chris W]

Household ? definition and meaning

Is a household a house, or part of a house, what about a batch?
(I'm getting a very bad feeling about their intelligence and methodology).

A new-build , if it's half done. Is it half a house?

Household is a term used in economics. It is very different to a dwelling.

Household - definition and meaning

A household refers to a social unit of people living in a house or a home, i.e., under one roof. However, this definition can slightly vary among countries and organizations. For example, in the U.S. the census bureau has two terms for it.
1. There is family-household, which consists of the members that are related by blood or law.
2. There is also the non-family-household, which comprises people who share their homes or live on their own.
The UK government defines the term as:
"One person or a group of people who have the accommodation as their only or main residence and for a group, either share at least one meal a day or share the living accommodation, that is, a living room or sitting room."

https://marketbusinessnews.com/financial-glossary/household-definition-meaning/

[McDuck]

Household is a term used in economics. It is very different to a dwelling.

Household - definition and meaning

A household refers to a social unit of people living in a house or a home, i.e., under one roof. However, this definition can slightly vary among countries and organizations. For example, in the U.S. the census bureau has two terms for it.
1. There is family-household, which consists of the members that are related by blood or law.
2. There is also the non-family-household, which comprises people who share their homes or live on their own.
The UK government defines the term as:
"One person or a group of people who have the accommodation as their only or main residence and for a group, either share at least one meal a day or share the living accommodation, that is, a living room or sitting room."

https://marketbusinessnews.com/finan...ition-meaning/

Thanks for that.
It's very interesting.

We have to be more severe though!
I like the council definition.
Basically "A thing with a bed in it".

And that's all that matters, for the purpose of this equation.
Consider an empty batch for example, it"s price is still going to pull up the price of a household in that same small town

[Chris W]

Household vs dwelling

I like the council definition.
Basically "A thing with a bed in it".

And that's all that matters, for the purpose of this equation.
Consider an empty batch for example, it"s price is still going to pull up the price of a household in that same small town

The legal word is "dwelling".

In law, a dwelling (also residence, abode) is a self-contained unit of accommodation used by one or more households as a home - such as a house, apartment, mobile home, houseboat, vehicle, or other "substantial" structure.

https://en.wikipedia.org/wiki/Dwelling

Note:

1) A household can own one dwelling - typically an owner occupied house
2) A household can own no dwellings - a low income household who is unable to buy a dwelling (possibly due to financial constraints such as low income, inability to meet minimum house deposit amounts, inability to get finance from a lending institution). These households are typically renters (or may even be homeless - such as sleeping in a car).
3) A household can own multiple dwellings - such as a family that owns the house that they live in, a batch, and some residential investment properties.

[McDuck]

....Household - definition....A household refers to a social unit of people ..../[/URL]

Hi Chris.

Yes.
I like were you're going with this.
The community or social side of houses is important.
A community or neighborhood is an invisible support structure around a house.
I should consider the diagram on that level.

Also your second point, the legal definition,
which describes the even wider (invisible) legal support around housing.
I should consider the diagram on that level also.

The thing is, that diagram is such a mess,
I need to get the structure of it corrected,
before I can plug in all you're most excellent sub structures.

I really like the way you want to clear up the definitions before getting into it.
Ok.
It's worth taking a little stroll sideways to see exactly what we are talking about.
On a deep level.
What is a house?

See below VVVVVVV

https://www.youtube.com/watch?v=G1G1eUgd5zs

https://www.youtube.com/watch?v=JM9zZW7HdF0

https://www.youtube.com/watch?v=EDp0WMuVrPE

https://www.theatlantic.com/video/index/395078/housing-through-the-centuries/

If you watched all that, you're probably at the conclusion that houses are just funny looking trees.

[McDuck]

[/QUOTE]

Question:

What would the most simplistic form of this diagram look like?
(You know, get the bones right, then decorate it later).

I suppose it would be that : price is a function of supply and demand?

More specifically that:

The more houses there are, the lower the price?
(An inverse relationship).

And the more people there are, the higher the price.
(A positive relationship).

What would that look like?... as a formula?

[McDuck]

In a really tight form then:

( people ) x ( the Inverse of houses ) = ( Price )

lets test it.

Equilibrium
(1 people) X (1/ 1 houses) = (1 coins).

add more people.
(2 people) x (1/1 houses) = 2 coins.
Yes, correct, more people means higher price.

Now, reset, and adjust house number.
(1 people) x (1/2 houses) = half a coin
Yes, correct, increase house numbers, price goes down.

Yup. That's the raw formula.

(Demand) x (1/Supply) = (Price).

Or

D x 1/S = P

[McDuck]

Soooo...The most basic shape for this diagram is....wait for it....




D/S = P



Or: Demand divided by Supply equals Price.

[McDuck]

Now, lets convert it into real objects. That way the rules can't be twisted.


D/S = P . becomes.


People / Houses = Silver Coins.

[McDuck]

Ok now we have our clean diagram , we can start to play with it.

Basically we have three boxes.

Box 1: People.

Box 2: Houses.

Box 3: Gold Coins.

That's it.


Unfreeze box 3 first.

Gold coins.

Obviously gold coins can be added to the system.
The Govt or the Banks add coins to the system.

See here for a usual effect of this.

https://en.wikipedia.org/wiki/Price_revolution

[McDuck]

Ok now we have our clean diagram , we can start to play with it.

Basically we have three boxes.

Box 1: People.

Box 2: Houses.

Box 3: Gold Coins.

That's it.

I guess we need to make sure the three boxes (above) are clear.

So.

Box 1 : PEOPLE.

It isn't ALL people.
It's just the people who are INVOLVED in the real estate game.
And furthermore, just those involved in the real estate game right at the MOMENT of the Freeze.

And those people have to be READY, WILLING, and ABLE.


* They might even be buyers from another country.
* Or a person who can't get a big enough loan might be disqualified from this group.
This gives a clue where you might slip INTEREST RATES into the diagram.