In the neighboring cities of Vancouver, the "known and obvious" laws are false. We have developers building skyscrapers full of condos which are selling for 500k-2M for a 1 bedroom. They're largely vacant because they're bought as investment properties. The ultra-rich can afford these places, but don't need to sleep in them. The demand isn't just people who need a place to stay, and rental prices are absurdly high.
We've got a new tax in Vancouver that's helping: the empty homes tax. But that's only Vancouver and not the outlying area.
They aren't false. There just hasn't been sufficient building allowed to take up the slack. If Vancouver took a page from Wizards of the Coast's tactics, prices would eventually go down. Namely: you have to convince speculators that you are willing to build (issue cards) until the value of speculative assets falls to the livable price for everyone else. If they were willing to allow unlimited building until the prices fell to the desired level, eventually speculators would realize that Vancouver property is a terrible bet.
Actually the presence of these investors is just a reflection of Vancouver's own unwillingness to allow said amount of building. If the speculators thought there was any chance of them building enough to meet demand, they would no longer view housing in Vancouver as a safe investment. So it's really a self-inflicted wound, not a violation of the laws of supply and demand.
That being said, an empty home tax does not seem like a bad supplemental approach. However, even assuming the tax is perfectly effective, if the population inflows outpace building, prices will continue to rise. And I would guess that is likely to be the case. The tax is a band-aid, but the problem needs stitches and cyanoacrylate.
The cities are all extremely friendly to developers (our "affordable housing" is $1700/mo for a 1-bdrm and developers are only required to build a small fraction of "affordable" units). I'm not sure how familiar you are with the area, but it doesn't seem like anybody is holding back on new development except for some weak and failing anti-gentrification efforts. Another significant factor in our local economy is a massive amount of money laundering, perhaps billions of dollars worth. It's been washed in real estate -- and laundry is one place where supply and demand break down: losses are acceptable.
What we're seeing is a huge demand for apartments, at rates that property owners can't afford, given the massively inflated value (hence tax). And homeowners (the upper-middle class), sensibly, don't want to see the market crash. So they don't actually want the government to act: new homeowners fear losing half of their investment. It's a vexatious problem all around
Perhaps in Vancouver the supply constraint is not political, although I somewhat doubt that. My impression from reading about it is that they allow relatively little high density building.
From looking at this, it looks like over the last three years they've added between five and six thousand units a year. But the annual population growth during that time has been around 30k people per year. Given the average household size in Canada is south of three people, that means there have been ten thousand households added, two for each unit built.
So, to the extent that Vancouver's government is preventing the building of mid- and high-density housing, I stand by my statement. If they have done all they can to enable the building of such construction, then we must look elsewhere for our cause.
I don't believe the money-laundering is as large a factor as simple supply and demand. The money-laundering report says that prices may have been inflated at 5% (and maybe more in Vancouver proper) but how could a 5% increase put off so many buyers? Also the problem with the report is it's a lot of guessing. Yes, money launderers may have been buying mansions and expensive condos but the vast majority is bought by not-money-launderers. I'm afraid this money-laundering narrative has gotten out of hand in the media and the politicians where they are blamed for everything. Plus Vancouver is notorious for a slow approval process for construction permits with waits of 1-2 years.
Yes, this. Six story 2x apartments per story + shared community space per 4 blocks = 48 units vs 4 units. The density also supports and drives community resources like shops, pubs, doctors and schools and makes public transport feasible. No need for 20 floor monsters.
We've got a new tax in Vancouver that's helping: the empty homes tax. But that's only Vancouver and not the outlying area.