In many large cities, textbook signals for cheaper housing are flashing, yet price tags refuse to follow. Populations are thinning, borrowing costs have climbed, and careers now stretch further across the life cycle, but apartment listings and land auctions tell a different story.
The core tension lies in how demand and supply adjust. A smaller population does not automatically mean fewer households; delayed marriage, solo living and migration into superstar cities can keep household formation robust even as headcounts fall. On the supply side, strict zoning, height limits and slow permitting act as a structural cap on new construction, turning urban land into a quasi‑fixed asset. In that setting, higher interest rates can reduce transaction volume while leaving prices stubborn if sellers resist nominal losses and if landlords can pass costs into rents.
Financial dynamics add another layer of inertia. Real estate still functions as a preferred store of value in many economies, so global capital inflows, tax incentives and credit guarantees can sustain valuations despite weaker fundamentals, a classic case of distorted marginal effects. Longer working years also lengthen the period over which mortgages can be serviced, propping up effective purchasing power. When monetary policy tightens but planning rules and investor psychology remain unchanged, the housing market can stay locked in a high‑price equilibrium even as its demographic base quietly erodes.
